In a recent lecture to a Stanford MBA class, Steve Ballmer (CEO of Microsoft) called Google a one trick company, implying that Google's search and advertising business is the only true stream of income, while everything else they do is "cute". While I agree that most of Google's other great products (Google Maps, Google Docs and Sheets, Google Checkout, etc.) don't generate a substatial income, they will do so in the future. We're beginning to see the early stages of it, as Google is now selling their on-line enterprise solutions, adding more products everyday. While we aren't seeing the immediate effects, we will begin to see more and more companies adopting Google products.
And why wouldn't they? It's safe to say that a substantial number of people prefer Google products, and that many knowledge workers are sick and tired of Microsoft Products failing them.
But, what really intrigues me about Google is the level of innovation they sustain. Google Labs is growing, with Google Engineers adding more products and unique ideas every day. In my opinion, these products will take years to fully develop, but I do foresee one product becoming extremely profitable quickly: Google TV.
We can already see that Google TV is coming. Some of you have probably seen Mark Erickson's elaborate hoax of beta testing it and dismissed it, but it is an intriguing view. Google seems poised to launch Google TV and generate a study stream of revenue if it does it right. We really don't know how Google will set up Google TV, but here are some interesting combinations:
Google could potentially sign contracts with major broadcasting stations (think CBS, ABC, NBC, TBS) and offer to host their movies and t.v shows. These shows would be available to watch on demand, meaning that consumers would be able to choose which episode to watch whenever they wanted to.
Then, Google should offer two options to consumers: 1) to watch the streaming video for Free with content based ads (based on their gmail accounts, search history, or television viewing history), or 2) to use an iTunes model where the consumer can pay a nominal fee ($1.99) per episode to download it to their computers commercial free. In this model, Google will offer all the same services that iTunes offers (hopefully with less restrictive copright encryption), and it will outdo iTunes by offering to let viewers watch the shows for free.
In the commercial based on demand shows, marketers will pay for their ads to be viewed by consumers. Ads will be shown based on keywords, meaning that they will be tailored more towards the individual consumer. Consumers will be able to click on the ad which will open up a new window, not disrupting their show. This provides marketers the advantage of better reaching their target audience, and will only have to pay for each ad view and/or each ad click. Google will take a small cut of the fee charged to marketers, and the television companies (CBS, ABC, Nickelodeon, TBS, etc.) will receive a larger share.
This seems like a win-win situation for everyone. Google will leverage YouTube and Google Video together and start generating revenue, media companies will now be able to use the internet in addition to tv's to distribute content and generate ad income, and marketers will now be able to better reach their target audiences.
I think this will be Google's "second trick" - aka, Google's next big revenue generating business. I'm anxious to see what Google will actually do.
Any thoughts, comments, or opinions? Please post them to further the discussion!
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