January 08, 2010
For the last five or six years, the burning question I get is "how did Google pass Yahoo?"
It's not my favorite discussion, but in the spirit of abundance, I've pontificated. Initially, I thought it was the result of a breakthrough search algorithm (Page Rank). But that wouldn't have sustained them up until today. Next, I concluded that it was leadership and management style (read Peanut Butter Manifesto).
However, after watching a recent CNBC Special (Inside Google), I finally realized how they rose to the top -- and will likely stay there for a long time. They are focused on the cloud based services: stocking it, mining it, providing access to it, generating value from it. Their main competitors like Yahoo have been focused on content (Bill Gates wrote an article in 1996, Content Is King, that dominated the leadership vision of Web 1.0 and permeated Yahoo speak for years.)
The "Content Is King" mantra may have been right for the mid-90's, but today with over fifty percent of online advertising (against content) still unsold, it makes you wonder. Yahoo's main acquisitions, with the exception of Overture, were content related: Broadcast.com (audio/video), Geocities (user), Launch (music) and so on. Meanwhile, Google worked on making the cloud's database more useful to users who needed to buy things or hire companies (search). They scanned hundreds of thousands of books, not just for content, but to improve the cloud's research capabilities. They invested in satellite based maps to dramatically improve the cloud's ability to compete with Mapsco's and the like (remember how bad Mapquest was?).
As Yahoo experimented with a CNBC type show (Finance Vision) and a variety of others (Entertainment, Business, etc.), Google worked on getting our favorites apps out of the software realm and into the cloud. Services like Google docs are "software as services" and only require bandwidth to access and use.
Finally, consider the issue of wireless phones. Yahoo's approach was to aggregate content for the phone and provide a thin layer of services. Google went all in and developed Android, an operating system for the phone that elevated the competition beyond dotcoms -- to Motorola and Apple!
I can't say for sure, but I'm willing to bet that certain Google executives have read and digested the book Customer Capitalism (a classic from the early 2000's). This book suggested that to win tough business battles, you need to surround the customer with services that solve all of their problems and leave no value gaps. While Yahoo, AOL and MSN thought wide, Google went deep. Combined with management and the reality that paid search is the biggest win/win in online advertising, the whole picture makes more sense to me now.
Recent articles seem to support my view that content is no longer king, it's likely queen or maybe a duke (Content As Pauper). For entrepreneurs watching from the sideline, make sure your strategy keys in on the issue of web based services and not just content to watch/read or listen to.