First lets look at diversification. Diversification is good because it help reduce risk and enable firms to translate strength in one area to another i.e. synergy. Microsoft is perhaps the most successful user of diversification. It uses its dominates in its Windows operating system to introduce new products as bundle components, thus reducing consumer’s incentive to look for alternatives from competitors.
Diversification proponent are urging Googles to go beyond search and go into other areas such as selling or producing games, music, and other services that will provide an alternative source of income other than placing relevant ads with search results. In another word Google should be more like Yahoo. Sound good, but diversification may leads to incoherent and conflict of interest. When two Google products get into each other’s way, which one should give in? For example should a product be rank higher simply because it belongs to Google? If it does wouldn’t it distort research results and drive away users? And, will the loosing products become a burden to the winning products? Sony’s lost of its dominate in the portable music market that it created to Apple’s Ipod is perhaps the most telling example. Sony was not able to translate its dominate in analogue portable music to digital portable music was mainly due to its content producing divisions (music & movie) fear that digital devices will facilitate piracies and thus reduce division revenue.
Moreover, despite its success Google is no Microsoft and Search is simple and easy it is not like an operating system where switching is tiresome, costly and require retraining. Googles is apparent dominance is nothing like Windows’s monopoly. Google’s market share in Internet search is only 36.5% and its closest competitor Yahoo is at 30.5%. Simply put Google’s narrow market lead does not allow it to use Microsoft’s diversification strategy.
Google should not make Sony’s mistake nor does it have microsoft’s monopoly. However this does not nassary exclud the use of diversification strategy. Google just needs to diversify with coherent and adhere to a single vision. What is Googles vision? On their website its says
Google’s mission is to organize the world’s information and make it universally accessible and useful.
That’s the vision and any diversification that may contradict that vision should be restricted to shareholders portfolio and should not be in company’s product range. With this vision Google is already diversifying, over the last years Google has bought so many companies and introduced so many products I have lost count. They bought or introduced: Google Earth, Housingmaps.com, Google Maps, Keyhole, Google Desktop, Google SMS, Google Print, Google video, Google News, Gmail, Google Web Accelerator, Personalized homepage, Dodgeball, Orkut, Hello.com, Picasa and Blogger. I have no idea why anyone would think Google is not diversifying. Almost all of Googles diversifications are positioned to serve its single vision by digitalizing information to make them searchable and organizing information. Google do not tries to create or provide content.
Is Google vision a viable one? I argue it is. As I have argue in pervious article that the explosion of content facilitated by the increase ease to create content will put premium on those able to make better sense of incoherent information not the content creator. Some people have even vision the demise of content creators like news media. With the world of information out there, the most desirable need of people is the make sense of it, not more information.
Its kind of weird reading the diversification proponent of Google’s urging Google to be a better Yahoo after reading a recent article in the Economist on Yahoo’s personality crisis of good at many excellent in none; and the result of strategy war game between Harvard business school students and MIT Slone management school student who assumes the identity of four of the biggest online presences namely, Google, Microsoft, AOL, and Yahoo. Google came up on top follow by Microsoft, AOL and Yahoo. The Economist argue the fatal flow of Yahoo is its inability to tap in the individual created content (blog, etc) like Google can, as well as the product divisions conflict (Yahoo content competing with individual created content) that might slow its growth and alienate some users.
And critics want Google to be more like Yahoo? What are they on?
I will continue and take about advertising strategy of Google in my next article.
To be edited…