Google. When you read that word, the first thing you probably thought of was search. Considering Google accounts for around 70 per cent of all web searches in the world (or about 85 per cent of the English-speaking world), and has done for a decade, that’s not a huge surprise. Heck, Google’s search engine is so renowned and ubiquitous that it’s one of only a few brands that has slipped from protected, trademarked usage into the common vernacular. It is not unusual to google instead of search for something (even if you’re using Yahoo or Bing!), much in the same way that you use a thermos or tear off some cellophane (both of which used to be capitalised trademarks).
You’re probably aware that Google has other products, like Maps, Google+, or Blogger, but they’re so inconsequential in the grand scheme of things, compared to Search. You could probably argue that Gmail and Android are important products. However, to be honest, even in the case of Android’s hundreds of millions of users, it’s not like anything much would happen if Google ceased development – its open source nature means anyone (Samsung, Microsoft, etc.) could pick it up and run with it. Losing Gmail would be a pain in the ass, but there are plenty of viable alternatives out there.
If we lost Google Search, however, we’d be distraught and discombobulated. Bing is just about usable in the US, and China has Baidu, but that’s about it. Google Search is a fundamental part of the Internet. Without it, entire swaths of the web would be deprecated and quickly laid to waste. I don’t think it’s hyperbolic to suggest that without Google Search, society as we know it would change dramatically.
It is a little bit scary that one service has so much significance. The phrase “don’t put all your eggs in one basket” comes to mind. Having a single point of failure, especially when the service is as important as Google Search, is never a good idea. In much the same way that we have multiple water reservoirs, power stations, hospitals, and schools, we really shouldn’t have just one viable search engine. Google could turn Search off tomorrow, if they really wanted to.
But – and now we get to the crux of the matter – while Search is an important part of your life, it is the complete and utter be-all-and-end-all lifeblood of Google itself. Without Search, Google would have to fire the majority of its workforce or face losing billions of dollars per year. As of the end of 2013, 91 per cent of Google’s income derived from advertising – the bulk of which stems from paid ads on search results. The remaining 9 per cent comes from a mix of sources, but mostly Google Apps (Google’s enterprise version of Gmail and Docs/Drive).
Everything else – Android, Gmail, Docs, Blogger, Maps, etc – is just icing on the cake; benevolent gifts from the great Web Father in the sky that generate almost zero profit. To derive 91 per cent of your revenue from a single source is incredibly dangerous. In much the same way that Google poached the search market from Yahoo, Altavista, and others, another startup could pull the very same trick on Google itself. Despite booming revenues and profits, Google is precariously placed. The online display advertising business will not exist forever. The search company needs to do something, and quick.
In a word, what Google needs to do is diversify – it needs to develop new revenue streams that, ideally, aren’t connected to its advertising products. As it stands, almost all of Google’s web properties (except Apps) generate their money from display ads, which are managed by the AdSense and DoubleClick programs (and yes, both are owned by Google). Google Apps, which sells a monthly subscription of Gmail, Docs, Calendar, and Drive to businesses, is a good start – but Google needs more.
Just so you understand the scale of the challenge that Google faces in its attempt to diversify, let me give you a few more figures. Google’s revenues last quarter were $14.9 billion (£8.95 billion). 91 per cent of that, or $12.54 billion (£7.55 billion), derived from advertising. The other $1.23 billion (£740 million) comes from “other Google revenues,” which mostly stem from Google Apps subscriptions. Android, despite it being shipped on over 200 million smartphones in 2013, provides negligible revenue. (At the end of 2012, it was estimated that Google had only made $550 million or £330 million from Android devices, but almost $2 billion or £1.2 billion from iOS devices. These figures have surely changed in 2013, but the fact remains that Android isn’t a big money maker). Chrome, the browser, generates advertising revenue and nothing more – ditto Blogger. Maps, News, Plus – no income here. Basically, it’s advertising and Apps, and that’s it.
Of course, this isn’t to say that Google isn’t trying to diversify. In fact, Google is somewhat famous for its “throw it at the wall and see what sticks” approach, which has resulted in the company running a vast number of free products and services. Almost none of these services, though, make any money – and in many cases probably cost Google a lot of money to continually develop and keep online. After becoming CEO in 2011, Larry Page very quickly started the process of shuttering many of these services, stating that Google needed to put “more wood behind fewer arrows.”
Where, then, does this leave Google?
Hell yeah, robots!
Google has never been afraid of using its huge cash reserves (estimated to be in the region of $60 billion or £36 billion) to acquire new products and personnel. DoubleClick and AdMob, Google’s two big cash cows, were big-ticket acquisitions – at $3.1 billion (£1.85 billion) and $750 million (£450 million) respectively. YouTube was acquired for $1.65 billion (£1 billion). Motorola Mobility was acquired for $12.5 billion (£7.5 billion) – though, as time goes by, it really does seems this deal was about patents, rather than getting into the hardware business.
The most notable of these acquisitions was Nest Labs, a small hardware company that makes the Nest thermostat and Protect smoke detector, which was picked up for a hefty $3.2 billion (£1.9 billion). (Google’s second largest acquisition ever, ahead of DoubleClick and behind Motorola Mobility, if you’re keeping count.) Throughout December 2013, Google picked up eight of the world’s top robotics companies, including Boston Dynamics of Atlas and Alpha Dog fame, for undisclosed sums. Back in May 2013, Google picked up Makani Power, an airborne wind turbine power generation startup, for an undisclosed amount. Google has also picked up two big AI startups, DNNresearch (for an undisclosed amount) and DeepMind (for around $500 million or £300 million), the purpose of which is currently unclear.
Its most notable projects are Google’s self-driving car, and more recently Google Glass and a smart contact lens for diabetics that can measure your blood sugar level from your tears. Google X is reported to be working on around 100 projects, and it would seem that most of them are unrelated (or only tangentially connected) to Google’s current core businesses. In short, Google X is on the hunt for Google’s next billion-dollar business. The question on everyone’s lips, though, is what will that billion-dollar business be?
The future of Google is not search
While Google has a lot of cash, the $3.2 billion (£1.9 billion) that it paid for Nest was by no means an inconsequential sum. Google probably wouldn’t lose sleep if one of its smaller acquisitions had to be written off, but Nest is a biggy; Nest’s user-friendly brand of home automation is obviously something that Google is seriously interested in. Likewise, by picking up no less than eight robotics companies and becoming the world’s pre-eminent robotics company overnight, Google is definitely signalling that there will be Googlebots in our not-so-distant future. We can probably ignore Google’s smaller acquisitions for now (though given how much electricity Google’s data centres consume, I wouldn’t be surprised if it goes into the cheap/green energy sector).
While there is certainly some money to be made from selling smart home gadgets, Google is probably more interested in Nest because of its ability to gather vast amounts of information. Some might say that Google’s forte is in processing vast amounts of data (web crawling, tracking cookies, advertising spends), and turning it into valuable services and information. Imagine if every home in the US or UK (or indeed elsewhere) had a Nest thermostat that reported usage patterns back to Google. If Google could process that data into usable analytics about how we use and heat our homes, it could be worth billions to the right companies.
It’s naive to think that Google will stick with just the Nest thermostat and smoke detector, too. I would be surprised if Nest isn’t working on some solution to turn the dumb devices in your home into smart devices that report their energy usage to a central hub. You can envision some kind of slim-line Nest plug, which then allows other devices to be plugged into it. This Nest plug would measure the energy usage of whatever’s plugged into it, and connect to a central hub via Wi-Fi. You would then be able to log into the central hub remotely to see how much energy your home is currently using – and, of course, you’d be able to turn plugs off, as well. Such a system could include timers and automation, too – maybe you set a space heater to turn on an hour before you get home (or maybe your Nest thermostat, which has already learnt that you like to keep your study warm, turns the heater on automatically before you get home).
With this kind of data, Google would know almost everything about our lives – which it could then easily turn into money, either via existing channels, such as targeted advertising, or by selling/using the information in novel ways (designing new gadgets/software, selling the information to broadcasters, publishers, supermarkets, and so forth).
Then there’s the robots. There are two distinct directions that Google could take here. The easy route – the tried and tested route – is industrial robotics. Robots that assemble cars and gadgets, Mars rovers, robots that debone hams at high speed, robots that automate data centres (pulling out dead hard drives, slotting in new servers as they’re needed, and so on). The harder route is consumer robotics: The science-fictional robot that rolls stealthily around your house and asks, at just the right moment, “Sir, would you like some help with that?” This would be an entirely new and unproven sector, but the potential profits (and again, the massive amounts of data) from being the first company to popularise the in-home robot make the risk worthwhile. Such Googlebots would obviously tie in nicely with Google’s other Nest-oriented home automation efforts, too.
So, that's the answer to the question: Is Google a search company? Yes, for now, but over the next few years it will become something more – something far greater and much more complete. If you thought Google already had a fairly firm grip on your life, and knew slightly too much about your habits, desires, and aspirations, just wait until it also powers your car, house, and office. It won’t be the Google Search Engine anymore; it’ll just be the Google Engine, and despite that slight nagging feeling that we’re doing something wrong, we’ll continue to feed it with anything and everything because the rewards from having an almost human-like machine intelligence watch over us, and make our decisions for us, will be impossible to resist.