Has Google Bitten Off More Than It Can Chew?


Brent Schlendler asks if Google is spinning out of control.

Google is a company convinced of its own brilliance and its clear vision of the future. Being a hotbed of Mensa members will do that to you. As will stumbling early onto an obscenely lucrative business model. The same thing happened to a company called Microsoft.

But that doesn't mean that the fundamental rules of the universe don't apply – immutable things like Newton's gravity or Murphy's Law. I bring this up because Google has just announced two extraordinarily ambitious strategic gambits in the span of a week, and I'm not convinced that it can pull either of them off.

Google is a great company, but over the past few years, I've heard people predict crazy things… as if the laws of economics no longer apply. Yes I know, skeptical views are never as popular as statements about how "this is different" or "things have fundamentally changed", but I feel compelled to stay skeptical that Google can disintermediate any and every market it wants to.

Here is my concern. I have been following the business press for about 12 years now. In that time, I've heard that Microsoft was going to take over the world, then Cisco. By the time I began blogging, it was Walmart that was scary powerful and was going to own everything. All three of those companies stumbled. So now that Google is the flavor of the month, why I should I expect any less from them? The fact that they hire geniuses and give them 20% of their free time to work on whatever they want is not nearly as important as the fact that they were in one of the fastest growing markets in the world at a time when it exploded.

Google has slayed one dragon, and as a result, has built up a false confidence that they can slay all the other dragons they don't like. They may have a decent level of success, but it's much much harder now that the dragons know all about Google, and are prepared.

Don't get me wrong. I'm not saying Google is a bad company. Google is a great company. I'm just saying they are subject to the diseconomies of scale that come with trying to fight wars on multiple fronts and effectively manage dozens of major projects and tens of thousands of engineers. Size can be the economic equivalent of kryptonite for supergrowth companies, and I wish Google would return some cash to shareholders instead of waste their gains investing in new projects with mediocre returns.

  • I share your concerns. The ability to deal with technical complexity is not the same thing as the ability to manage business complexity, and it remains to be proven that Goog knows how to balance decentralization and control to achieve the latter.

    Plus, I’m not sure the obsessive focus on being “smart” is very smart. This study should raise some caution flags:

  • Good post, Rob. It seems to me that when people start suggesting that the laws of nature, human nature or economics have been repealed, they’re headed for trouble. In Google’s case, so far, most of that language has been by observers, but if Google-heads start to believe it, they’re in for a rough ride. Even Mensa-types make mistakes, it’s part of humanity. That’s why I like my dad’s line that “life is the art of new and better mistakes.”

  • Rob

    David, Excellent link. Thanks.

    Wally. Agreed. I joined MENSA a few years ago and, truth be told, the people at the meetings don’t impress me. I think there is even a tendency among highly intelligent people to avoid decisions and actions which might call their intelligence into question. I know I’ve been hit by that before.

  • joey

    I believe that Google is out of control. I do really hope that they crash and burn and I have been praying that MSN or Yahoo can develop a semi decent share of the search traffic. Google has way too much powerful, the ROI on Adwords advertising is horrible.

    I think that they have a good thing going but I can’t wait for it to crash and burn. As a website owner I have paid a lot to advertise on google, and struggled for years to get good listings with their engine.

    Remove your Google Toolbars, never click on an Adwords Ad, Support MSN and Yahoo. That is the only way.

  • Regret

    Well, of course they won’t grow to the sky… no company ever has or ever will. And you don’t need to be a MENSA member to understand that.

  • Does regression to the mean apply? How about Parkinson’s law of bureaucracy? How about hiring smart people who are “extinct volcanos” as the best universities do? The trick is not predicting that Google has feet of clay but knowing when the hobbling will come.

    Joey I would love to find out more about Adwords’ ROI. Are their any good resources doing the sums?

  • “The fact that they hire geniuses and give them 20% of their free time to work on whatever they want is not nearly as important as the fact that they were in one of the fastest growing markets in the world at a time when it exploded.”

    You really missed the mark with that statement, ASK.com Yahoo.com and thousands of others can vouch for that fact. Google is more productive. There is no reason to believe they will not be more productive in other areas they enter. Microsoft is Microsoft. Google is Google. You have no idea how they can or cant handle the complexity they will face.

  • earl

    agreed Chris. Who’ve dared to keep the Investors away from decisions on company’s growth, resisting them strongly when asked for returns on their money, can definitely be ready to face such adversities !