Google -- an innovation machine
Commentary: Institutionalizing search for creativity
By Bambi Francisco, MarketWatch
Last Update: 12:01 AM ET Aug. 18, 2005
E-mail it | Print | Discuss | Alert | Reprint |
SAN FRANCISCO (MarketWatch) -- In its first year as a public company, Google managed to capture investor attention by repeatedly topping their earnings expectations, and by constant innovation.
Google (GOOG: news, chart, profile) -- we've come to learn and appreciate in one year's time -- is about innovation. We've not only come to expect from Google financial results that continue to defy predictions, we've come to expect a lot of neat ideas.
Since bursting onto the public scene one year ago today at an impressive (yet in hindsight conservative) market valuation of $23 billion, and a corresponding stock price of $85, Google has been busy innovating. It's launched at least a dozen new products since its IPO.
Of course, it's almost expected, given that Google's corporate culture and organizational principles include dedicating 20% of work time toward musing, exploring, and quite simply -- creating.
To be sure, some of these innovations are so unrefined and strange that one could argue the search giant is guilty of cooking up a lot of spaghetti just to see what sticks. (Google's chef did make a special appearance at Google's first analyst day.)
These innovations range from the practical to the peculiar. They consist of technologies that allow us to search TV content, inside books, and our messy computer desktops. Other map and satellite technologies let us search for a cab by honing in on the actual location of a taxi en route, and even our homes' blurry rooftops from up above.
No matter, whether it's pride on Google's part, or a feeling of obligation to meet investor expectation and curiosity, Google always takes the time to acknowledge and proudly share its product launches. It's one of the few companies whose president of products gets on the regular quarterly conference call to go over the newest products. Of course, Larry Page is also the company's co-founder, and along with Sergey Brin, the final arbiter of any product's formal release.
Google is being recognized as a cutting edge think tank. When I recently asked Vincent Cerf and Bob Kahn -- considered pioneers of the Web architecture -- which Internet company was most innovative, both said Google.
According to a 2005 survey of nearly 1,000 executives by Boston Consulting Group, Google came in as the seventh most innovative company, behind Apple Computer (AAPL: news, chart, profile) , 3M, Microsoft (MSFT: news, chart, profile) , GE, Sony (SNE: news, chart, profile) , Dell, and IBM. EBay (EBAY: news, chart, profile) and Amazon.com (AMZN: news, chart, profile) didn't even make the top 10, but made the top 20 list. Google even received more votes than Wal-Mart (WMT: news, chart, profile) and Starbucks.
A generation ago, Hewlett-Packard, brought to business-speak its "H-P Way," a management philosophy that emphasized teamwork and innovation. Now Google looks set to replicate that, though it's hardly so buttoned-down. I wouldn't be surprised if Google's free wheeling culture is adopted by others. Let's call it the "Google Way." Already its Google Labs testing ground, has been mimicked by Ask Jeeves, now part of InterActiveCorp (IACI: news, chart, profile) , and Yahoo (YHOO: news, chart, profile) .
Google Labs offers a model of today's innovation process: Observe or discover how consumers behave, address their desires, cultivate a need, and then serve up a finished product.
Investors get options
The elaborate set of services -- mostly still in beta form -- that Google has put forth in the last year will undoubtedly result in winners and losers, and more of the later than the former.
As futurist Paul Saffo once wrote, for every hit, like the VCR, there are many examples of spectacular duds, like RCA's DiscoVision, and quadraphonic stereo. Don't know what they are? Exactly Paul's point.
Additionally, every ambitious project entails unexpected hurdles, and potentially costly burdens. Just last week, Google's project to scan millions of library books was temporarily halted because publishers complained that Google was violating copyright laws. Google's video search activities have also ruffled the feathers of some television outlets, for the very same issue.
In Google's latest 10Q, filed earlier this week, Google said that it incurred $4.5 million in costs due to products, like Google Earth.
So far the costs of innovation seem manageable for a company that's producing a lot of cash flow and other financial metrics that continue to defy predictions.
But it is unclear what the ultimate price will be for Google's inventions. At the very least, investors should look at the boatload of innovative services as options on businesses that may individually earn $1 billion down the road. That is the high threshold that Google itself is aiming for. Google said it will fund projects that have a 10% chance of earning a billion dollars over the long term.
Google Maps, which was introduced this past February, is a high contender for being the feature that helps Google's efforts to attract local advertising. The nation's yellow page market is worth about $20 billion making for lots of opportunities to tie searches and directions.
Google Maps software coding has also made possible some very interesting location-based services on top of it, such as Housingmaps.com, a combination of Google Maps and housing listings off of Craigslist.
Google's innovations in last 12 months
Here's a list of some products and services that weren't even part of Google one year ago.
In October, Google said it bought Keyhole, which delivers a multi terabyte database of images and mapping information that let's users "fly around the world from their home computer." Google plans to build on it as localization of search becomes more important, Page said.
In October, Google announced Desktop search, launched its SMS product, enabling people to get information instantly on their mobile handsets, and introduced Google Print, which lets people read excerpts of book content.
In November, Google said it doubled its index size to 8 billion pages. In December, the company announced its offer to the world's premier libraries to digitize their collections and make them searchable on the Web.
At the end of January, Google announced Google video. With Google video, users can search the content of TV programs, such as PBS, the NBA, Fox News and C-Span. "What we've done for the Web, Google aims to do for television," said Page. In April, Google began to offer users the ability to upload video to Google with the aim of allowing them to distribute and monetize that video. In March, Google rolled out enhancements to Google News, making it possible for users to customize the service to fit their needs.
Also in the first quarter, Google upped the storage it offered for Gmail users to 2 GB. In February, Google introduced Google maps. At the end of the first quarter, it was integrated with Google local products and then Keyhole, for satellite imagery.
In May, Google introduced Google Web Accelerator, which helps speed up the browsing experience. In April, Google launched My Search History, a service that let's people find their past searches.
At the end of the second quarter, a free enhanced version of Keyhole was offered, and it became known as Google Earth, which was introduced in June 2005. Google also launched a search appliance for corporate customers that want their own appliance to search their own information. In the first quarter, Google's image search was also increased to index more than 1.1 billion images.
Personalized homepage was introduced in May. Google Web Accelerator was introduced in May 2005. Personalized Search was introduced at the end of June.
Next bag of tricks
Google has also hinted it might get into the online payment business, though it's unclear just what that payment platform will look like.
In the spring, Google bought Dodgeball, a text-messaging and social networking site, which many observers expect to be integrated into Google's social-networking site, Orkut. Some observers also expect Google to either build upon Hello.com as an instant messaging service. Speculation also was raised that Google would buy Meetroduction, a company that has an IM platform, called Meetro.
UBS analyst Benjamin Schacter expects Google to add voice capabilities to its communication services some time in the first quarter of 2006.
About the only test product that has yet to go into beta is technology that allows Google to install a wire directly into our brains.
But I'm sure that'll come in the next year.
Commentary: Institutionalizing search for creativity
By Bambi Francisco, MarketWatch
Last Update: 12:01 AM ET Aug. 18, 2005
E-mail it | Print | Discuss | Alert | Reprint |
SAN FRANCISCO (MarketWatch) -- In its first year as a public company, Google managed to capture investor attention by repeatedly topping their earnings expectations, and by constant innovation.
Google (GOOG: news, chart, profile) -- we've come to learn and appreciate in one year's time -- is about innovation. We've not only come to expect from Google financial results that continue to defy predictions, we've come to expect a lot of neat ideas.
Since bursting onto the public scene one year ago today at an impressive (yet in hindsight conservative) market valuation of $23 billion, and a corresponding stock price of $85, Google has been busy innovating. It's launched at least a dozen new products since its IPO.
Of course, it's almost expected, given that Google's corporate culture and organizational principles include dedicating 20% of work time toward musing, exploring, and quite simply -- creating.
To be sure, some of these innovations are so unrefined and strange that one could argue the search giant is guilty of cooking up a lot of spaghetti just to see what sticks. (Google's chef did make a special appearance at Google's first analyst day.)
These innovations range from the practical to the peculiar. They consist of technologies that allow us to search TV content, inside books, and our messy computer desktops. Other map and satellite technologies let us search for a cab by honing in on the actual location of a taxi en route, and even our homes' blurry rooftops from up above.
No matter, whether it's pride on Google's part, or a feeling of obligation to meet investor expectation and curiosity, Google always takes the time to acknowledge and proudly share its product launches. It's one of the few companies whose president of products gets on the regular quarterly conference call to go over the newest products. Of course, Larry Page is also the company's co-founder, and along with Sergey Brin, the final arbiter of any product's formal release.
Google is being recognized as a cutting edge think tank. When I recently asked Vincent Cerf and Bob Kahn -- considered pioneers of the Web architecture -- which Internet company was most innovative, both said Google.
According to a 2005 survey of nearly 1,000 executives by Boston Consulting Group, Google came in as the seventh most innovative company, behind Apple Computer (AAPL: news, chart, profile) , 3M, Microsoft (MSFT: news, chart, profile) , GE, Sony (SNE: news, chart, profile) , Dell, and IBM. EBay (EBAY: news, chart, profile) and Amazon.com (AMZN: news, chart, profile) didn't even make the top 10, but made the top 20 list. Google even received more votes than Wal-Mart (WMT: news, chart, profile) and Starbucks.
A generation ago, Hewlett-Packard, brought to business-speak its "H-P Way," a management philosophy that emphasized teamwork and innovation. Now Google looks set to replicate that, though it's hardly so buttoned-down. I wouldn't be surprised if Google's free wheeling culture is adopted by others. Let's call it the "Google Way." Already its Google Labs testing ground, has been mimicked by Ask Jeeves, now part of InterActiveCorp (IACI: news, chart, profile) , and Yahoo (YHOO: news, chart, profile) .
Google Labs offers a model of today's innovation process: Observe or discover how consumers behave, address their desires, cultivate a need, and then serve up a finished product.
Investors get options
The elaborate set of services -- mostly still in beta form -- that Google has put forth in the last year will undoubtedly result in winners and losers, and more of the later than the former.
As futurist Paul Saffo once wrote, for every hit, like the VCR, there are many examples of spectacular duds, like RCA's DiscoVision, and quadraphonic stereo. Don't know what they are? Exactly Paul's point.
Additionally, every ambitious project entails unexpected hurdles, and potentially costly burdens. Just last week, Google's project to scan millions of library books was temporarily halted because publishers complained that Google was violating copyright laws. Google's video search activities have also ruffled the feathers of some television outlets, for the very same issue.
In Google's latest 10Q, filed earlier this week, Google said that it incurred $4.5 million in costs due to products, like Google Earth.
So far the costs of innovation seem manageable for a company that's producing a lot of cash flow and other financial metrics that continue to defy predictions.
But it is unclear what the ultimate price will be for Google's inventions. At the very least, investors should look at the boatload of innovative services as options on businesses that may individually earn $1 billion down the road. That is the high threshold that Google itself is aiming for. Google said it will fund projects that have a 10% chance of earning a billion dollars over the long term.
Google Maps, which was introduced this past February, is a high contender for being the feature that helps Google's efforts to attract local advertising. The nation's yellow page market is worth about $20 billion making for lots of opportunities to tie searches and directions.
Google Maps software coding has also made possible some very interesting location-based services on top of it, such as Housingmaps.com, a combination of Google Maps and housing listings off of Craigslist.
Google's innovations in last 12 months
Here's a list of some products and services that weren't even part of Google one year ago.
In October, Google said it bought Keyhole, which delivers a multi terabyte database of images and mapping information that let's users "fly around the world from their home computer." Google plans to build on it as localization of search becomes more important, Page said.
In October, Google announced Desktop search, launched its SMS product, enabling people to get information instantly on their mobile handsets, and introduced Google Print, which lets people read excerpts of book content.
In November, Google said it doubled its index size to 8 billion pages. In December, the company announced its offer to the world's premier libraries to digitize their collections and make them searchable on the Web.
At the end of January, Google announced Google video. With Google video, users can search the content of TV programs, such as PBS, the NBA, Fox News and C-Span. "What we've done for the Web, Google aims to do for television," said Page. In April, Google began to offer users the ability to upload video to Google with the aim of allowing them to distribute and monetize that video. In March, Google rolled out enhancements to Google News, making it possible for users to customize the service to fit their needs.
Also in the first quarter, Google upped the storage it offered for Gmail users to 2 GB. In February, Google introduced Google maps. At the end of the first quarter, it was integrated with Google local products and then Keyhole, for satellite imagery.
In May, Google introduced Google Web Accelerator, which helps speed up the browsing experience. In April, Google launched My Search History, a service that let's people find their past searches.
At the end of the second quarter, a free enhanced version of Keyhole was offered, and it became known as Google Earth, which was introduced in June 2005. Google also launched a search appliance for corporate customers that want their own appliance to search their own information. In the first quarter, Google's image search was also increased to index more than 1.1 billion images.
Personalized homepage was introduced in May. Google Web Accelerator was introduced in May 2005. Personalized Search was introduced at the end of June.
Next bag of tricks
Google has also hinted it might get into the online payment business, though it's unclear just what that payment platform will look like.
In the spring, Google bought Dodgeball, a text-messaging and social networking site, which many observers expect to be integrated into Google's social-networking site, Orkut. Some observers also expect Google to either build upon Hello.com as an instant messaging service. Speculation also was raised that Google would buy Meetroduction, a company that has an IM platform, called Meetro.
UBS analyst Benjamin Schacter expects Google to add voice capabilities to its communication services some time in the first quarter of 2006.
About the only test product that has yet to go into beta is technology that allows Google to install a wire directly into our brains.
But I'm sure that'll come in the next year.
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