GOOGL - Google

[rmitz]

The Google I was passionate about was a technology company that empowered its employees to innovate. The Google I left was an advertising company with a single corporate-mandated focus.

 

This article, it is from a link that was posted earlier, the guy is basically arguing that there is not enough throwing crap at the wall.  That google needs to work more on innovating.  Innovation often happens through a somewhat random approach of trying different things, picking the ones that work and re-iterating.  It was what GE has done, it is what MMM does, it is to some extent what universities do, it works.  It is frequently cited by silicon valley tech entrepreneurs as a valid approach.  This argument that it's something they should stop doing is preposterous.  They have created a $267B company from 2 people 15 years ago.  They have proven the approach.  Find a better argument.

 

There are plenty of things to dislike about google but there approach to innovation is not one of them.

 

Well, at issue here is that these are services that by normal business standards, have a ton of users, but by Google standards, they aren't such a big deal.  A normal business would try to monetize something like this first; at Google it's not worth the time.  Now, at another big company you might see these kinds of products sold off and rebranded, or even given away.  At Google that just doesn't work, and it has to do with the technical details of their infrastructure and how their products are created; it's so interwoven that you cannot just "give away the source code" or even sell the entire product, without including much more.

 

Once you have a pattern of things being tried and then going away, you start to wonder if there's any point to learn the new thing Google is pushing, trying to integrate it into your workflows and so on, if you're just going to have to change to something else later.  Change happens, and it's not impossibly hard to do so, but the time value of a few hours work in conversion, can certainly start to pile up.

[Guest valueInv]

Well, at issue here is that these are services that by normal business standards, have a ton of users, but by Google standards, they aren't such a big deal.  A normal business would try to monetize something like this first; at Google it's not worth the time.  Now, at another big company you might see these kinds of products sold off and rebranded, or even given away.  At Google that just doesn't work, and it has to do with the technical details of their infrastructure and how their products are created; it's so interwoven that you cannot just "give away the source code" or even sell the entire product, without including much more.

If that were true, they would have to shut down Google+ first since it generates even less traffic than Reader.

 

 

They're probably shutting down Reader to force people to move to Google+.

[Guest valueInv]

The Google I was passionate about was a technology company that empowered its employees to innovate. The Google I left was an advertising company with a single corporate-mandated focus.

 

This article, it is from a link that was posted earlier, the guy is basically arguing that there is not enough throwing crap at the wall.  That google needs to work more on innovating.  Innovation often happens through a somewhat random approach of trying different things, picking the ones that work and re-iterating.  It was what GE has done, it is what MMM does, it is to some extent what universities do, it works.  It is frequently cited by silicon valley tech entrepreneurs as a valid approach.  This argument that it's something they should stop doing is preposterous.  They have created a $267B company from 2 people 15 years ago.  They have proven the approach.  Find a better argument.

 

There are plenty of things to dislike about google but there approach to innovation is not one of them.

 

Having worked for startups for most of my career and have been on founding teams, I can tell you thats not how the Valley works. You will be laughed out of VC offices if you present a business plan that involves "throwing stuff at the wall". There have been a few startup superstars who have tried that approach and have failed miserably. Startups are founded to address a real gap in the market or to "scratch their own itch".

 

Google still makes majority of its money from a handful of advertising products. A majority of its other ones have failed. While it is good at engineering innovation, it is by and large dependent on other companies  for product innovations. Android, Keep, Propeller, Currents, Google+, Offers, etc are copies of other peoples products. No surprise in this announcement:

 

http://www.latimes.com/business/technology/la-fi-tn-google-smart-watch-20130322,0,1672909.story

 

When they do try to go out on their own , they fail miserably: Buzz, Nexus Q, GoogeTV, Google Health, etc. Thats why you see them having to shutdown so many products. They did do some interesting stuff in the beginning but they have by and large stagnated.

 

Oh yeah, their ad auction system, the source if much of their revenue was copied from Overture too:

 

http://news.cnet.com/Google%2C-Yahoo-bury-the-legal-hatchet/2100-1024_3-5302421.html

 

Most people outside the tech industry think innovation if about adding new features as fast as you can. It's not. Innovation is about solving real problems and making peoples lives easier:

 

http://www.huffingtonpost.com/jonathan-littman/samsung-swung-and-missed-_b_2902946.html

 

[Palantir]

Yes, we get it, you think Google is worthless.

[no_free_lunch]

ValueInv,

 

That is exactly how the valley works.  Seed investment is often 100k or less.  Once a basic product is working, investment starts to ramp up as they generate revenue and prove the product out.  The numbers vary widely but as you proceed you will hit $1m, $10m, $100m if the product is successful and has mass market appeal.  So if the valley is so fricking smart, why aren't they only investing in the seed investments?  Why pay $10M or $100M if you can just pay $100k?  It is because they don't know.  They have just no idea which ideas are going to work and which ones won't.  Not only that, many companies pivot.  Twitter was started at a soon to be failing startup for instance.  So the seed investors are buying into companies that might get rich off of an idea they come across while building the idea they are pitching. Innovation is the jungle, success is derived from natural selection.

 

So if you are google and you know how the system works, what do you do?  You can't dream up the exact products that are going to work, that would be so awesome if you could but they don't have that vision.  So they give their employees 20% time to work on some dream idea.  Most of the ideas fail.  Think of this as an early stage seed investment that google is making.  The ideas that achieve basic prototype and seem to have some potential get more funding.  Gradually, if they are deemed to have a purpose they are implemented, think of this as later stage funding.  How is it any different from the way that the valley works on principal?  What is your issue with this?

 

You also wander into the distinction between true revolutionary innovation and incremental innovation.  I think we might actually agree on this one, that most innovation including Apple's has been more incremental.  The "inventor" is inspired by someone else's product and builds a better mousetrap.  I don't get what you are trying to say.  Is it that because google makes different versions based on someone else's idea they are a bad company?  If that is the case then Apple does that too, so many companies do, what does it matter?  If that is not your point, well what is your point?  This is part of their throw stuff against the wall strategy that you despise.

 

Google's problem is that they are pulling back on this process.  They should be doing more innovation.  People who come up with and work on these ideas should be given percentage ownership in the product they develop.

 

Even if google is an advertising business, it is the technology that brings in the people to sell the advertisements to.  They need to come up with new technologies to grow and lock in that user base.

 

I will also note that I quoted earlier from a link that you had posted.  The whole point the author was making was that google isn't innovating enough, that they aren't throwing stuff against the wall enough.  YOU LINKED TO THAT.  Then you post about how stupid they are for throwing stuff against the wall.  Isn't that just a hugely hypocritical thing to do?  Am i misunderstanding?  What did you get out of that link?

 

It was from your post here:

 

A view from inside Google:

 

http://blogs.msdn.com/b/jw_on_tech/archive/2012/03/13/why-i-left-google.aspx

 

Again, google has problems, it is probably a bit overprice or maybe fairly priced right now.  I can see how you could criticize them for shutting down google reader.  I give rmitz good credit for his argument there.  I just don't see what is wrong with them trying different things out.  Have a look at MMM and learn how they do things, it is the same approach.  They should be doing more of it.

[bargainman]

Well, saying 'this is how the valley works' is kind of odd, since it's a vast ecosystem of many different VCs and companies and approaches.  The fact that you say that the valley does not encourage the experimental approach, is really interesting.  It sounds like you've worked in the startup scene, but it also sounds like you don't live in the valley.

 

Have you heard of the lean startup methodology?  It's all the rage these days in 'the valley', and it is pretty much that "throw spaghetti, see what sticks'..  In a nutshell it advocates that a startup is basically a learning machine.  it is meant to optimize the build measure learn cycle, and it should go in knowing full well that it will pivot many times as it truly learns and understands its market.  Now there are advocates of the methodology, and those who believe it's limited (which it is).  But I will say that GE was at the lean startup conference talking about how their new tech division was run like that, a division that makes billion dollar bets.  "throw spaghetti, see what sticks, iterate" == "build measure learn".

 

 

[Guest valueInv]

Well, saying 'this is how the valley works' is kind of odd, since it's a vast ecosystem of many different VCs and companies and approaches.  The fact that you say that the valley does not encourage the experimental approach, is really interesting.  It sounds like you've worked in the startup scene, but it also sounds like you don't live in the valley.

 

Have you heard of the lean startup methodology?  It's all the rage these days in 'the valley', and it is pretty much that "throw spaghetti, see what sticks'..  In a nutshell it advocates that a startup is basically a learning machine.  it is meant to optimize the build measure learn cycle, and it should go in knowing full well that it will pivot many times as it truly learns and understands its market.  Now there are advocates of the methodology, and those who believe it's limited (which it is).  But I will say that GE was at the lean startup conference talking about how their new tech division was run like that, a division that makes billion dollar bets.  "throw spaghetti, see what sticks, iterate" == "build measure learn".

Lean startup is the latest management fad making its rounds through the valley. Let's talk in 5 years to see if it is still around.

[Guest valueInv]

ValueInv,

 

That is exactly how the valley works.  Seed investment is often 100k or less.  Once a basic product is working, investment starts to ramp up as they generate revenue and prove the product out.  The numbers vary widely but as you proceed you will hit $1m, $10m, $100m if the product is successful and has mass market appeal.  So if the valley is so fricking smart, why aren't they only investing in the seed investments?  Why pay $10M or $100M if you can just pay $100k?  It is because they don't know.  They have just no idea which ideas are going to work and which ones won't.  Not only that, many companies pivot.  Twitter was started at a soon to be failing startup for instance.  So the seed investors are buying into companies that might get rich off of an idea they come across while building the idea they are pitching. Innovation is the jungle, success is derived from natural selection.

 

1st set of problem assumptions:

 

1, So if the seed investment is 100K or less, it means they're "throwing crap at the wall to see what sticks"? Where do you get that. Seed rounds are usually done by angels who manage small portfolios that don't have 10M to invest in a startup. Even if they do, they spread the risk around just like you and me. So if Buffet invests 100s of millions in companies and say, Parsad's fund invests two orders of magnitude below that, does that he is "throwing crap at the wall to see what sticks?. It takes about 6 months to raise a round of VC funding and VCs do months of due diligence. Does that sound like "throwing..."?

 

Like I've said before, innovation is about solving real world problems. That means it is a directed, not random approach.

 

2, Let's consider the absurdity of investing say 10M in a brand new startup. You have a couple of founders pitch you with a presentation. You decide to invest 10M in the first round. You typically get 30% which would mean 2 guys with a presentation is now worth 30M. Sensible? Now you see why people put in only 100Ks in the seed round. But Google doesn't care about valuations the way VCs do.

 

There are many other reasons but I will I don't want to write 5 pages on the topic.

 

So if you are google and you know how the system works, what do you do?  You can't dream up the exact products that are going to work, that would be so awesome if you could but they don't have that vision.  So they give their employees 20% time to work on some dream idea.  Most of the ideas fail.  Think of this as an early stage seed investment that google is making.  The ideas that achieve basic prototype and seem to have some potential get more funding.  Gradually, if they are deemed to have a purpose they are implemented, think of this as later stage funding.  How is it any different from the way that the valley works on principal?  What is your issue with this?

 

2nd set of problem assumptions:

 

Google is not a VC fund, they are a company. Their products are interconnected, so is their brand, infrastructure, etc. What is good for a VC in not necessarily good for Google. That is why companies have overarching corporate strategies. One VC company does not have much connection with another. One Google product is usually connected with many others. Advertising is connected with almost all, search in connected with Android (or so Google likes to claim) and so on.

The Reader problems effect Google's brand and goodwill within the blogger community and hence, its other products. Those sort of effects don't exist in VCs or the Valley.  Google is very different from VCs. Their charter, quarterly earning pressures, the amount of capital, their time horizons,etc are all different. So why you expect Google to do what VCs do? Every company is a fresh start for a VC, Google has existing business to protect. They function under an entirely different set of circumstances

 

"Going fishing" is not a corporate strategy.

 

 

You also wander into the distinction between true revolutionary innovation and incremental innovation.  I think we might actually agree on this one, that most innovation including Apple's has been more incremental.  The "inventor" is inspired by someone else's product and builds a better mousetrap.  I don't get what you are trying to say.  Is it that because google makes different versions based on someone else's idea they are a bad company?  If that is the case then Apple does that too, so many companies do, what does it matter?  If that is not your point, well what is your point?  This is part of their throw stuff against the wall strategy that you despise.

 

3rd set of problem assumptions:

 

You assume that just because you build on someone else's innovations, your own innovation is incremental. You can build revolutionary innovations on top of others. The telegraph was not incremental just because it used electricity. Apple revolutionized  the PC market, the smartphone market and the tablet market. IF you think those products that Apple introduced did not produce a revolutionary change, read no further, none of this will make sense to you.

 

There is a difference between building a product that uses other innovations ; builds on top of them and simply introducing a copy of them. My problem is that many of Google's products are latter while it markets itself as the former. When it attempts to "innovate" it produces a slew of failed products. Google's success has been from flooding the market with cheap products. It uses a fast follower strategy much like MSFT did back in the day. 

 

I will also note that I quoted earlier from a link that you had posted.  The whole point the author was making was that google isn't innovating enough, that they aren't throwing stuff against the wall enough.  YOU LINKED TO THAT.  Then you post about how stupid they are for throwing stuff against the wall.  Isn't that just a hugely hypocritical thing to do?  Am i misunderstanding?  What did you get out of that link?

 

It was from your post here:

 

Quote

A view from inside Google:

 

http://blogs.msdn.com/b/jw_on_tech/archive/2012/03/13/why-i-left-google.aspx

 

4th set of problem assumptions:

 

You assume that just because I posted that post, that I endorse everything that he said.

 

I have long argued that FB is the biggest threat of Google. People have argued to the contrary. In turn I have said that if it wasn't then why would they make social the no.1 priority. Why would they risk their other businesses? That post provides a datapoint supporting my argument.

 

Maybe I should have said more on the post but then I never mentioned innovation in that post either.

 

The "throwing.." post was in response to someone else. Just because two posts follow each other does not mean I am talking about the same thing. There are multiple conversations going on in each thread.

[no_free_lunch]

There is a lot here and I don't feel like typing essays.  The basic flaw in your argument is you assume that google's style of innovation is complete randomness.  It is not.  The products or features people develop in their 20% time, from what I understand, generally have some purpose.  Certainly the ones that get more formal funding do.  Some of them are a little more tangential to google's future profitability some are more directed.  Look at the example that started this all, google reader.  How does that not meet your criteria of satisfying a demand?  When you think about it from that perspective, that we're not talking randomness, just picking the best ideas of the employees, it really does start to seem more like a VC firm.  One with tremendous market power, engineering capabilities and technological scale. 

 

I think our primary difference here is that while we both see google veering off course, I think it's just a little, you think they've hopped the tracks, we disagree on the solution.  My point is that what has got google to their current market cap is, in part, this incremental approach to innovation.  It has worked so far.  I think you are advocating a more top-down centralized approach while I am advocating bottom-up evolutionary.  I think you have been staring at Apple too long where the top-down approach was wickedly successful.  Google doesn't have Steve Jobs, their best bet is bottom-up.

 

As far as the difference between revolitionary / incremental innovation, who cares.  I mean at the end of the day I don't care where the idea came from, I care whether google can implement it and monetize it.  Again, they have built a $260B company which by your definition has no revolutionary technologies (although if you ask a comp-sci prof you would likely get a different opinion).

[Guest valueInv]

On the theory that VCs/angels "throw crap at the wall to see what sticks":

 

http://techcrunch.com/2013/03/26/paul-graham-picky/

 

Like I said, don't assume.

[VAL9000]

On the theory that VCs/angels "throw crap at the wall to see what sticks":

 

http://techcrunch.com/2013/03/26/paul-graham-picky/

 

Like I said, don't assume.

 

PG and YC are exceptional.  Plus this is PGs book - of course he's not going to run down his most recent crop of investments. 

 

Here is some real data on the subject, showing that throwing crap at a wall might be a better approach:

http://www.avc.com/a_vc/2013/02/venture-capital-returns.html

[Guest valueInv]

On the theory that VCs/angels "throw crap at the wall to see what sticks":

 

http://techcrunch.com/2013/03/26/paul-graham-picky/

 

Like I said, don't assume.

 

PG and YC are exceptional.  Plus this is PGs book - of course he's not going to run down his most recent crop of investments. 

 

Here is some real data on the subject, showing that throwing crap at a wall might be a better approach:

http://www.avc.com/a_vc/2013/02/venture-capital-returns.html

Better for what? Under performing indexes? The ones that supposedly throw crap are the early stage ones. Take a look at their returns.

 

So if Google is as efficient as them, they're generating a return of 3.9% on their investment in new products. If so, I would advise them stop those investments and return the cash to shareholders.

 

[Palantir]

Can we please pause this discussion and take it to another thread? Just saying, it gets really tiring to click on either this or the Apple thread and re-read the same rehashed arguments.

[bargainman]

Can we please pause this discussion and take it to another thread? Just saying, it gets really tiring to click on either this or the Apple thread and re-read the same rehashed arguments.

 

+1

[RichardGibbons]

On the theory that VCs/angels "throw crap at the wall to see what sticks":

 

http://techcrunch.com/2013/03/26/paul-graham-picky/

 

Like I said, don't assume.

 

Umm, also, this article means the exact opposite of what you think it means.  They're looking at 47 companies and hoping to get one big winner.  i.e. they're throwing crap at the wall and seeing what sticks.

 

Like you said, don't assume that the article supports your position, just because you want it to.

[Guest valueInv]

On the theory that VCs/angels "throw crap at the wall to see what sticks":

 

http://techcrunch.com/2013/03/26/paul-graham-picky/

 

Like I said, don't assume.

 

Umm, also, this article means the exact opposite of what you think it means.  They're looking at 47 companies and hoping to get one big winner.  i.e. they're throwing crap at the wall and seeing what sticks.

 

Like you said, don't assume that the article supports your position, just because you want it to.

 

Read the acceptance rate:

 

http://techcrunch.com/2012/05/22/ycombinator-80-strong/

 

Does that clear it up for you?

[RichardGibbons]

Read the acceptance rate:

 

http://techcrunch.com/2012/05/22/ycombinator-80-strong/

 

Does that clear it up for you?

 

Yes.  It's clear that you don't understand what "throw it against the wall and see what sticks" actually means.  That 2% hasn't stuck.

[Guest valueInv]

Read the acceptance rate:

 

http://techcrunch.com/2012/05/22/ycombinator-80-strong/

 

Does that clear it up for you?

 

Yes.  It's clear that you don't understand what "throw it against the wall and see what sticks" actually means.  That 2% hasn't stuck.

What are you talking about?

[RichardGibbons]

Read the acceptance rate:

 

http://techcrunch.com/2012/05/22/ycombinator-80-strong/

 

Does that clear it up for you?

 

Yes.  It's clear that you don't understand what "throw it against the wall and see what sticks" actually means.  That 2% hasn't stuck.

What are you talking about?

 

Sticking is converting a neat idea into a successful business that grows to be worth a huge multiple of its start up valuation.  It's not being selected by Y Combinator for a $100,000 investment and some advice.  The fact that Y Combinator only chose 2% of their applications has nothing to do with "sticking".

 

By investing a tiny amount of cash, Y Combinator is essentially throwing stuff against the wall and see what sticks.  They don't expect everything to pay off, but expect 1 or 2 to do amazing things.  They just don't know which ones they are yet.

 

So, when I say it's clear, I mean it's clear that you don't understand that's what they're doing and have totally misunderstood the phrase "throwing stuff against the wall and seeing what sticks".

 

(Not to say that your argument against Google is wrong.  Just that the example you chose to indicate Google has the wrong strategy is a counterexample to your argument, not evidence for your argument.  You could still be right, just not based on this evidence.)

[Guest valueInv]

The fact that Y Combinator only chose 2% of their applications has nothing to do with "sticking".

It has to do with "throwing". You do understand that we are talking about selectivity and discretion, don't you?

[Guest valueInv]

...speaking of which:

 

http://www.wired.com/gadgetlab/2013/03/google-delivery/

[RichardGibbons]

It has to do with "throwing". You do understand that we are talking about selectivity and discretion, don't you?

 

Never mind then.  I was curious, but you've enlightened me.

[Guest valueInv]

Add this to the antitrust suits:

 

http://gigaom.com/2013/04/02/google-faces-wrath-of-european-regulators-over-unified-privacy-policy/

[Guest valueInv]

More control for Google  :):

 

http://feeds.venturebeat.com/~r/Venturebeat/~3/NsqUs_KwjrQ/story01.htm

 

I wonder where Facebook Home puts ads from Google?

[Guest valueInv]

Also, expect a Android phone from Amazon this year that will cut out Google.