Posted May 23, 2007 11:03 am by with 10 comments

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Today I read that Google invested in a biotech startup, 23andMe. 23andMe was co-founded by Anne Wojcicki, new bride of Google Sergey Brin, so the investment is likely driven more by nepotism than by the drive to build Google’s business portfolio. However, it does bring up a good point — why must Google buy up every technology business under the sun?

Just this week, Google has been in talks to acquire, a leading online CRM application, most likely to compete further with Microsoft. But is all this investment in companies that do not complement the search engine itself wise for Google? It depends on what Google wants to be when it grows up.

Now frankly, I think many people who work in IT and marketing would love to see the almighty Microsoft be challenged, but while Google has the financial power to do it, is it the right business decision?

Google’s main source of revenue today is the Google AdWords program. AdWords is the number one reason why Google has been able to finance its visions and why they were able to go public in 2003 with historical opening stock prices. But as any engineer will tell you, you can always make a better mousetrap. So while AdWords is still very competitive and a respectable product, it could always be better — better for advertisers and better for searchers. Competitors are actively trying to knock Google off its mighty throne as well. When you’re number one, everyone is gunning for you — and there’s no place to go but down.

What also makes AdWords so successful is not just the quantity and quality of advertisers but also the quality of the search results in the organic listings. Anyone could build a great ad platform, but if the searchers don’t see relevant organic listings, they likely will not use a search engine. Less searchers means less advertisers.

All of this acquisition activity begs the question — what does Google want to be? What is its business plan here? While the search engine is good, (think like an engineer here) it could always be BETTER. So why divert resources to other interests? By focusing on the search engine and AdWords and only looking at technologies that might complement the search results, how much better could Google be? Could they finally deliver the crushing blow to Yahoo! and MSN forever?

By defocusing into other areas, Google risks having someone else build a better mousetrap. And if you ask many search marketers today, they may even tell you that there are some second tier engines that they think produce more relevant results than Google or have a better approach to search — those companies don’t have the brand momentum yet or the money that Google has. Google might want to remember what happened to Yahoo! and how Google overtook them. Yahoo!, too, defocused into many other areas — photos, entertainment, real estate — the list goes on forever. By defocusing on the search engine itself, Yahoo! left itself open to being overthrown by two young guys from Stanford.

So what is Google’s business plan? Will defocusing from search lead to loss of marketshare in search? I guess only time will tell.

About Janet Driscoll Miller

Janet Driscoll Miller is president and CEO of Search Mojo, a full-service search engine marketing agency.

  • Is it just me or does the idea of a company dedictated to the accumulation and distribution of information, getting into genetic testing absolutely frightening? I’m not a conspiracy theorist, but I can not see anything good coming out of this.

  • CRM makes a lot of sense if it can be tied into the advertising sales process, office tools, calendar, email etc.

    Adding special functions to manage the sales process from Adwords would drive more advertising sales.

  • Digant Savalia

    Even Adwords is not immortal – any new pay per performance ad revenue model coupled with moderately advanced search capabilities can create a serious threat for Google. Let’s see if Google can find it’s second cash cow before next pair of 2 guys-in-a-garage beat them.

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  • It’s obvious that they’re diversifying. With adequate resources allocated to their search, they’re just using the cash they get from adwords to acquire new, complimentary technologies which they can use to support their core business.

    I mean who here wouldn’t like to target their adwords at people with certain genes? 😛

    It all makes sense to me!

  • Will this mean we’ll be able to Google our DNA? A bit scary if you ask me. And I agree, Google is just diversifying their holdings.

    23andMe is actually hiring for web developers (as well as scientists). This leads me to believe that they’re building a web service for your genes..

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  • Google made the world’s best search engine on 2 employees and no budget. Now they’ve got 7,000 employees and billions…they don’t need all of those people and all of those billions to improve search.

    so of course they’re going to look around for the most interesting next big thing, which is not necessarily search. Without neglecting search they can dedicate the remaining 6,998 employees and billions to finding and launching that next big thing.

  • As someone mentioned above, I agree that they are diversifying their holdings. However, many of their purchases have been complementary, so are not too far off. I would prefer them to go after smaller companies, as their recent run of large acquisitions might introduce a little too much risk later on. Either way, they Google uses their machines to help them make their acquisitions: Google’s Acquisition Strategy