POTATO, POTAATO
Well, the New York Times, the Wall Street Journal and the rest of the media world are now following up on the story that Michael Arrington broke for TechCrunch yesterday, that Google is in talks to acquire YouTube for around $1.6 billion.
Almost as big a Google story for me though, is Google announcing a big change in how it's people work and innovate around it's famed "20% Time" rule.
This LA Times story says it well in it's headline, "Google puts Lid on New Products".
It goes on to explain:
"In another sign of Google Inc.'s growth from start-up to corporate behemoth, the company's top executives said Thursday that they had begun telling engineers to stop launching so many new services and instead focus on making existing ones work together better.
The shift is a major departure from Google's previous strategy of launching new services rapid-fire and highlights the 8-year-old company's struggle to stay focused during swift growth."
The edict comes from the top, as the piece continues:
" Co-founder Sergey Brin is leading a companywide initiative called "Features, not products."
This of course makes eminent sense for a multi-national company with a market cap over a $100 billion and services that are used day in and day out by hundreds of millions of people around the world.
The irony of course is that the typical start-up is often told by investors, both private and public, to make sure that it's main focus is on products, and not features.
Which is of course why big companies often buy little companies...so they can convert features into products.
Just like when Google bought all these other companies over the years.
Which goes to the heart of the question, what makes a feature a product?
Often it's just bundling features together.
As Google CEO Eric Schmidt explains in the piece above:
"Google plans to combine its spreadsheet, calendar and word-processing programs into one suite of Web-based applications."
Now that is a sound, time-proven strategy, all semantics aside.
Whether it's a product or a feature is of course how a company is managed at a given point in it's life-cycle. It's good to see Google moving to manage things differently.
In the meantime, here's a question for you: is YouTube a feature or a product?
DISCLOSURE: I am a long-time Google shareholder.
I can see this move of Google to buy YouTube as act of desperation to diversify from one stream revenue business which is slowing down with click fraud and slowing economy on one side and finally sobering thoughts of founders on all crap products they announced which are not working and/or not wanted by anyone on another. I can imaging that after a big battle inside and clear understanding that all very expensive R&D are not bringing NEW PRODUCTS WHICH ARE ADDING to revenue and bottom line they were pushed to make a move which suppose to bring new dimension and advertisement space for monetisation efforts. Will it save GOOGLE from falling short of expectations – I doubt it. Apart from copyright issues fully described by Mark Cuban and others from business point of view this acquisition is wrong at the wrong point in time: YouTube is just a place where people are unloading their video content - it is real “LONG TAIL” staff, 99% of it will be seen just by creator and five other guys maximum. In order to monetise this audience media it will take ages and maybe never be profitable. If I would like to see news I will go to news portal, I will use good video search engine for lectures or similar CONTENT. Apart from hype this 1.6 billion investment will not bring any even middle term (1-3 years) google size meaningful revenues. So we have now very interesting point of Google business development cycle which will be reflected in earnings this and next quarter: no new working ideas from inside, all released products are not material in sense of revenue, strategy is to move into video space and buy out time but there is no clear business idea apart from proposal to advertisers: now we will put your add on every video download (99% is how I am cool dancing or baking or nice place in Zumbaramba). On the margin compression side we will have slowing growth of revenue due to click fraud recognition and slowing economy (not only YAHOO! disease), increasing Capex (now with not clear picture whether any of these investments are actually working) and expense related to options from 1st and 2nd q around 151 mil, so Free Cash Flow will be way below to reflect any sustainable multiple to the current stock price.
Regards,
http://sufiy.blogspot.com/
Posted by: sufiy | Saturday, October 07, 2006 at 02:37 PM
Thanks for the concise article. If you would like to partake in a poll that lets you predict the outcome and vote at the same time on whether it was a good idea for Google... then please visit this link: http://www.tapoll.com/poll/id/594706440 Thanks!
Posted by: Dan Zen | Saturday, October 14, 2006 at 01:24 AM