Posted May 13, 2008 9:56 am by with 25 comments

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Fortune magazine has one of the most comprehensive “Google’s starting to fall apart” articles, I’ve seen in a long time.

Sure, it’s easy to suggest that Google has become too big, too arrogant, and has lost its original focus, but Fortune’s (long) article does a great job digging down and explaining why many are saying just that.

There were two things that really stuck out to me.

First, even Google’s biggest partners are concerned that the company is a one-trick (AdWords) pony.’s Marc Benioff puts it perfectly:

“What they need to do is build a full portfolio of revenue, as Microsoft has,” says Benioff. “They have a fantastic cash cow. They need a goat and a chicken.”

Second, the company is having trouble retaining its top talent. It seems Googlers would rather leave the company and struggle with a start-up, than use their 20% time to help Google find new revenue channels. More concerning is the apparent nonchalance of CEO Eric Schmidt:

“We’ve been hiring on the order of 100 people a week,” he says. “So in one week we hire more people than the people you just named.”

Wow! Yeah, but the people you lost include your CIO, CFO, head of ad sales, and its head of PR. Doesn’t that concern you Eric?

Google faces the huge issue of scaling its business. As it grows, it becomes less able to retain the “start-up” attitude that made it so successful–which is why Googlers would rather go it alone.

Last word goes to “Dean” who sent me the Fortune link and has this to say…

“I use this as exhibit A in my argument that Google will never see $2,000/share…or anywhere close. They are a big boy company now whose biggest challenge might be itself. Unfettered growth along with an unstructured culture will ultimately lead to a whole lot of inefficiency – my own experience at [a start-up] showed that unmanaged growth is the pathway to failure. With the 20% rule they are practically begging top talent to incubate their own start-ups and leave. All of this will lead Wall Street to put their foot down and demand that Google fall in line. I.e. Contain costs, drive efficiency, and steer away from unprofitable ventures. Not sure when tat will happen, but it will be sooner rather than later.”

  • But putting the staff turnover into perspective Google is at that age where lots of their long term (and senior) staff have vested. It’s only natural therefore that many of them will take their new found wealth and pursue their own interests/challenges. The same happened to Microsoft 10 to 15 years ago but they didn’t fall apart.

    Equally new hires will now have Google on their CV and probably never stood to get anywhere near the same level of options of the earlier staff.

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  • John, only one rider – I do not recollect MS suffering from similar hubris and riding on one pony!

  • The problem with losing senior people is that they are (or should be) in charge of bringing new hires up into the culture and giving them direction.

    What I’ve been wondering is: if a company has failed at all but two products, what do you really lose when you lose senior people?


  • You know that the departure of their PR person hurt them when Schmidt starts answering questions in that way.

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  • The article, and you, make some very good points. I think Google needs to get a goat and and cow too. Having one (only one) huge revenue stream might seem okay but if anything happens to that, the company is screwed. With today’s technology and constant innovation, AdWords and AdSense can disappear in a few years.

  • Is it really one revenue stream though? Ads on search, ads in newspapers, ads on television, ads on radio, ads on mobile devices, ads on web video, ads on every fricken website on the internet… Sounds to me like the author of the article knows the word “Adwords” without any real sense of what it is. This is like saying ClearChannel is a one trick pony. Google’s revenue is primarily ads, yes, but those ads cross pretty much every possible channel and medium now and only look to be expanding.

    Just another case of a reporter opening their mouth about things they don’t actually understand.

  • @Terry – Just because Google has lots of revenue channel opportunities, it doesn’t mean its getting actual revenue from all of them. 😉

  • Training staff costs money, as you train them they leave, that’s not good for business. And those that they train are their competition.

    I thought that working at Google was considered the best job in the world.

  • PS3

    I’m not sure I agree with you on the Adsense front Jayson. Google is still miles ahead in terms of being the search engine of choice and I don’t see anyone lurking in the wings to make a proper challenge there.

  • @Nicole, no Microsoft is not quite as bad as Google on that count, but then again it’s core has long been Office and Windows.

    @PS3, we don’t see anyone (yet), but the obvious source of a challenge is an ex Google employee taking the millions and self funding their own SE.

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  • Still Google search, mail and ads are the best and no one can reach its success.

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  • Also I think Google slowed down because there are nothing else to do for user. Groving social networks is long process. Voice, audio and video services Google already has.

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  • At this point, google makes so much money and has such an effective monopoly that I don’t share these concerns. As long as google protects it’s two mainstay items, search and adwords, I think they will maintain dominance. Conversely, I do think that google could soar to heights that would amaze the world if they can wrap their arms around their potential. In my blog post:, I talk about google being the greatest threat to the mighty microsoft empire.

  • oops. i meant to reference this blog in regards to googles threat to microsoft.

  • Just dont see a world without Google for the next 40 years or so. Are these executives holding Google stock options?

    Why not use that resume with Google on it to get with another start-up and collect another large chunk of options.

    Im also not sure that Adwords is Googles ONLY revenue stream. What are Googles plans for generating revenue on these desktop with Google Apps?

    Oh, some of those are paid services already are’nt they. Too much momentum in this industry, too many talented people beating down the door to get in. Still considered one of the best places in World to work.

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  • Agree that no one is near enough to challenge the Big G in advertisement business. Even the nearest one is far far off.

  • There’s no doubt that adwords is a one trick pony
    and just to illustrate this ,stop using adwords for a week or so and you’ll get emails from them wondering what happened to you and why you’re not
    dumping your usual amount of money in the machine
    carelessly “like they like”lol

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  • Ever considered that google might be deliberately creating the opportunity for staff to incubate thier own internet related companies to create diversity in the marketplace?? and having new people and input on a regular basis is actually a smart way to gather the newest and best into your company?? f you dso what you have always done you’ll get what you have always got companies that don’t change over time that cannot transition in the next generation in a smooth manner.
    The basis of good search has always been like the library; content divided up by subject, author, title, and now location and popularity that is determined by actual useage of the site.
    people put others down because they did not buy stock when it started and are jealous of others succeses.

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  • Now, I’m admittedly a rank amateur, but what I’m wondering is: could this be a viable longterm ‘strategy’ for lack of a better term? I mean, if these senior people are so quick to jump ship then you find out pretty quick who’s loyal and who’s not in the scope of things. Not calling those who leave ‘disloyal’ just pointing out that their hearts may lie elsewhere rather than with Google, Inc. Also, if those start-ups prove to be successful, perhaps they’re more likely to be Google-friendly and some very key and strong partnerships could be forged out of simple familiarity.

    I see what the article’s pointing out and it’s good journalism, but at the same time this ‘new era’ of web-based businesses may end up redefining “good business” as we know it, right?

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  • Well put Wolf.

  • Knee jerk reactions:

    -For the three months ended March 31, Google had a profit of $1.31 billion ($4.12 a share), compared with $1 billion ($3.18) in the first quarter of 2007

    -Isn’t offering something “other” than what you are good at like offering hamburgers at a chinese restaurant? Stick to what you do best right?

    -Isn’t it really easy to pick apart the big dog on top? Microsoft back in the day used to get abused on a daily basis about all the things they were doing wrong. Did we already forget about Vista?

    -If the NBT thing is Mobile, doesn’t it make sense that Google will absolutely own that space as well? What about what will happen with the G Phone OS?

    -I just think it was way to easy to find flaws in what they do, how they do it and when and that perhaps someone might have been starved to write a story about something that was surely going to draw eyeballs…

    my 2 cents, nothing more, nothing less.

  • here here

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