Google’s Incredible Strategy

There are many reasons to ignore Google. It sports a market capitalization of nearly $400 billion. The desktop search market is largely saturated. The company appears to be unfocused and has cast its net into areas (energy, robotics, fiber, automated vehicles, hot air balloons, home appliances, wearables, contact lenses) well outside of its core competency. It makes acquisition after acquisition, often times shuttering products or services soon after they are acquired. It’s taken every step possible to ensure the two founders have complete control of the company. More concerning, the founders appear to be running the company as the world’s largest science lab, leaving investors to wonder as precious capital is deployed into a multitude of moonshot projects. It is criticized by many as being an evil corporation.

But, hidden within all the noise are incredible plans. This is a company that tries to see 10-20 years in the future and build products in anticipation of what will unfold. A decade ago, the company began building and acquiring web services. This was during a time when most people thought the consumer internet was dead. Most of these services were quite pedestrian to start, but today have warped into best-in-class services which billions of people use. Maps, docs, e-mail, calendar, Picasa, YouTube, Chrome web browser, finance, news, notes, hangouts/voice, cloud storage, and books. These products are in most instances the best web apps you will find in their category. The services are so powerful that Google has convinced many consumers to purchase a new type of computing device, the Chromebook, which runs only web services and no desktop applications.  The Chromebook is a taste of the future.  Every single person who is on-line uses one of Google’s products. And the best part – they are free.

What Google wants is data. It is a hardcore data science company. And it gets reams of data from the billions of people using these web services, including search, on a daily basis. Google is constantly learning how we interact with the web, our PCs, our surroundings, and with one another, and uses this data to provide better and better services. It’s a wonderful positive feedback loop: better services → more users → more data → machine learning → better services. These products have changed the way we live in many ways and have made us a lot more productive. And, by the way, it allows Google to send us highly targeted ads.

Larry Page visited Africa in the early 2000s and found that most people he met hadn’t heard of Google. He instantly recognized that most Africans were more likely to purchase a connected mobile phone than a connected PC. This led to the acquisition of Android in 2004 and the beginning of Google’s important mobile strategy. Android is yet another product which Google provides for free; in fact, it is open source, meaning any developer can download the source code and modify it to his or her liking. Android’s explosive growth has provided an enormous tailwind for the company. There have been greater than 1 billion Android 30-day device activations to date and this number is surely to grow at a rapid rate in coming years. The mobile phone is an incredibly powerful device – it knows where you are, who you are talking to, how you travel, what information you are seeking and under what circumstances, and how you spend your time 24/7/365. Importantly, newly connected users, namely those in developing economies, will immediately plug into Google’s ecosystem; they won’t have an opportunity or incentive to explore alternatives. What’s the point? More data. The amount of data running through Google’s servers today is almost unimaginable. In fact, no organization on the planet, aside from perhaps intelligence agencies, knows more about us than Google.

I do not think Google is an evil corporation. If you read the founder’s letter and watch the dozens of interviews Larry and Sergey have given over the years, it’s clear that Google is a mission driven organization. The founders and the employees of Google truly want to create products and services that will push humanity forward. Larry Page has, on more than one occasion, mentioned Nikola Tesla as one of his inspirations. Tesla had a number of world changing ideas, but could never convince others to bankroll his seemingly loony projects. Larry and Sergey believe that it’s their mission in life to fund the looniest of projects if it has a chance to change the course for humanity. This is why they want control of the company; they don’t want short-term oriented shareholders derailing their mission.

If Google were to do something evil, it would forever destroy their brand and company. Not many things infuriate people more than a violation of their personal privacy. It’s wildly against Google’s interests to use its data for anything other than enriching its customers’ lives. For these reasons, I don’t have an issue with entrusting my personal information to Google. I believe it will do the right thing and use this data to make my life better. And, I don’t mind advertisements if they are relevant to what I am seeking. Remember the days when we used to buy the paper so we could search the classifieds? Imagine getting information on exactly what you are looking for at the exact moment you want it. I think that’s where we are heading.

As for the moonshots, there’s a group of incredibly bright people behind the Google X and ATAP projects. And the concept is quite brilliant. As was revealed in the excellent Fortune piece, Google Goes DARPA, the company tends to make a number of small bets on potentially world changing technologies. Importantly, the company quickly shutters projects which don’t show promise. This is the type of thinking and capital prudence which is required to achieve singular outcomes. It only takes one huge success, such as Android, to make the effort worthwhile.

A final point about Google. It is a powerful recruiting machine. Despite its size, it still attracts some of the most talented people in the world. Some names include former DARPA director Regina Dugan, acclaimed futurist Ray Kurzweil, former director of Google’s special projects, Sebastian Thrun, in addition to homegrown talent. Furthermore, top university grads still think of Google as one of the best places to work. Many ex-Google employees have started valuable companies, often benefiting from the education and network provided by Google. This is attractive to new graduates. In today’s world, compensation alone isn’t enough to woo talent. Many large technology companies have the means to pay top dollar for top talent. What attracts people to Google is its mission and culture. It’s a place where creative people can (i) develop and push forward their ideas and (ii) work on projects which will have a widespread impact on humanity. It’s the vision of the company, starting at the top, which attracts incredibly talented individuals.

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