Google: Has the ‘Don’t Be Evil’ Company Lost Its Mojo?

by Brad Moon | April 19, 2013 9:51 am

Google: Has the ‘Don’t Be Evil’ Company Lost Its Mojo?

In an industry full of famously cutthroat tech giants, Google (NASDAQ:GOOG[1]) was supposed to be different.

stockoftheweek Google: Has the Dont Be Evil Company Lost Its Mojo?[2]The search engine company, founded by Sergey Brin and Larry Page, was in a position to profit immensely from the information people type in their web browsers. From day one, they went to great lengths to distance Google from the rest of the pack, most famously with the “Don’t be evil” mantra.

The company’s Code of Conduct[3] was publicly built around the missive, with further emphasis on “focusing on their [customers’] needs and giving them the best products and services that we can.”

From the time it went public in 2004, Google made frequent first-place appearances on top employer lists, like Fortune’s annual 100 Best Companies to Work For.[4] Employees not only enjoyed enviable personal amenities like free food, exercise equipment and shuttle buses, they were also encouraged to spend 20% of their time to work on side projects in what is known as “Innovation Time Off.” All of this only added to the Google mythos.

When Apple (NASDAQ:AAPL[5]) released the iPhone in 2007, Google was ready with Android. Not only was the operating system offered for free to smartphone makers, but Google kept its OS open[6], allowing OEMs and users to modify it to their hearts’ content. That stands in stark contrast to Apple’s locked-down iOS.

The promise of Google — from a public perspective — was a company that really thought differently. It had people’s backs. It was going to play nice and it was going to be the company that dreamed up the products of the future.

The reality has proved to be somewhat different.

Google has been a great growth investment, as its stock increased more than 816% in since its August 2004 IPO. But the public has been souring on the company.

Most notably, the company has started taking a different approach toward innovation. While Google’s own engineers have been busy with cool projects like Glass, the company has never hesitated to use its cash to simply buy technology, snapping up somewhere in the neighborhood of 238 companies[7]. Last year’s Motorola Mobility deal, worth $12.5 billion[8], was the biggest yet.

Many of the products that have become synonymous with Google weren’t dreamed up in-house at all, they were bought. Android, YouTube and advertising tools like DoubleClick and AdMob were all acquisitions.

Google’s ongoing buying spree has earned it some bad consumer karma. Buying innovative companies isn’t the same as being innovative, and the motive for some of these purchases — such as buying popular iOS and Mac e-mail client (and Gmail competitor) Sparrow — is clearly business-focused.

According to The Verge, Sparrow’s team (now Google employees) confirmed the apps will receive no new updates[9], while their features will be rolled into Gmail. Mac and iPhone users were not amused.

Time published an article last year that sums up consumers’ feelings: “Why Google or Facebook Buying Your Favorite Startup Means It’s Probably Toast.”[10]

This vibe, which runs contrary to “Don’t be evil,” has only been made worse by the company’s habit of ruthlessly terminating products which are no longer profitable enough, or that don’t support long-term business goals.

On July 1, Google plans to pull the plug on Google Reader, the highly popular RSS reader it launched in 2005. The move prompted weeks of online outcry from devoted Google Reader users. But, as Google itself posted when announcing the move, Reader is one of 70 products it has shuttered since 2011[11] when it began a program it calls “spring cleaning.”

What about the product pipeline, though? Does Google have anything new and amazing to look forward to?

Well, there’s Project Glass — the augmented reality glasses that Sergey Brin has been wearing everywhere for the past year. While the technology in these glasses is cutting edge, reaction has been mixed.

First, the $1,500 price and unmistakable appearance threatens to make wearers into instant targets as elitist tech snobs. (They’re already being referred to as “Glassholes.”[12]) And there’s a growing list of facilities that plan to ban the device, citing privacy concerns.

Google held a contest to become a Glass early adopter, which required shelling out the $1,500 on top of using social media to talk about what they’d do if they scored a pair. (Then Google went ahead and set restriction on what winners could do with the glasses). The campaign just brought more negative publicity.

There’s also self-driving car project[13], but facing concerns like insurance liability and challenges in less-than-perfect driving conditions (like snow and construction zones), it’s unlikely that Google will be in a position to commercialize this technology for decades.

Last year’s surprise Nexus Q media-streaming device[14] was panned, then disappeared for retooling and hasn’t been seen since. The list goes on: GoogleTV? Google Fiber? Chromebooks? Better Motorola smartphones? Improved Nexus tablets?

Many of these are interesting products, and they all reflect Google’s stepped up presence in hardware and services[15]. But they also take an existing product and trying to improve on it — make it faster, or cheaper, or more stylish or easier to use. This is a strategy that can be very successful[16], as Apple has proved, but it isn’t necessarily innovative.

Expect Google’s focus to remain on its core ad business — all of the cool gear in the world can’t compare to search ad revenue. And as much as Google would like to diversify, virtually everything it commercializes comes down to one thing: boosting those revenues. Investors might appreciate this, but from a consumer point of view, it’s dull.

“Don’t be evil” became ironic years ago[17], and the company has since joined Microsoft (NASDAQ:MSFT[18]) as one of the companies frequently at the center of antitrust investigations[19].

While Google is still capable of putting out some cool products, it would take a rose-colored Google Glass to see the company as anything resembling its hip, counterculture beginnings.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Endnotes:
  1. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  2. [Image]: http://investorplace.com/hot-topics/stock-of-the-week/
  3. Code of Conduct: http://investor.google.com/corporate/code-of-conduct.html
  4. 100 Best Companies to Work For.: http://money.cnn.com/magazines/fortune/best-companies/2012/full_list/
  5. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  6. Google kept its OS open: http://investorplace.com/2013/04/google-must-tame-the-fragmentation-monster/
  7. 238 companies: http://gadgets.ndtv.com/internet/news/google-cfo-justifies-burgeoning-cash-pile-336887%23;
  8. worth $12.5 billion: http://investorplace.com/2012/05/google-seals-the-deal-on-motorola-goog-mmi-msi-aapl-msft/
  9. the apps will receive no new updates: http://www.theverge.com/2012/7/20/3172222/google-buys-sparrow-mail
  10. “Why Google or Facebook Buying Your Favorite Startup Means It’s Probably Toast.”: http://techland.time.com/2012/07/20/why-google-or-facebook-buying-your-favorite-startup-means-its-probably-toast/
  11. 70 products it has shuttered since 2011: http://googleblog.blogspot.ca/2013/03/a-second-spring-of-cleaning.html
  12. referred to as “Glassholes.”: http://www.zdnet.com/google-glass-and-the-emerging-glasshole-culture-7000014187/
  13. self-driving car project: http://googleblog.blogspot.ca/2010/10/what-were-driving-at.html
  14. Nexus Q media-streaming device: http://investorplace.com/2012/08/how-google-flubbed-its-nexus-q/
  15. stepped up presence in hardware and services: http://investorplace.com/2012/08/why-hardware-will-make-google-more-volatile/
  16. can be very successful: http://www.forbes.com/sites/gregsatell/2013/02/13/the-problem-with-tim-cook/
  17. “Don’t be evil” became ironic years ago: http://www.forbes.com/sites/sap/2011/09/02/google-needs-to-drop-its-do-no-evil-thing/
  18. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  19. at the center of antitrust investigations: http://www.economist.com/news/business/21576386-settlement-between-search-firm-and-european-union-takes-shape-try-it-and-see

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