Nearly six months ago, 4chan founder Chris Poole hit the free agent market and sold 4chan after several of his other startups ran out of money. Shortly after, Alphabet Inc (GOOG, GOOGL) snatched him up to supposedly help work on its social products.
While his work with 4chan is undeniably impressive, and he brings more than 12 years worth of experience building social network websites — all at the young age of 27 — the question most Google stock owners are likely asking is: “Will Chris Poole change anything at Google?”
Let’s find out.
GOOGL shareholders have seen the company’s efforts in social media fail to take off on multiple occasions. Its biggest effort, Google+, was shutdown and revamped last year after failing to attract and engage an audience. Indeed, Google’s failures have resulted in multiple rumors that the company was interested in acquiring Twitter Inc (TWTR) or Snapchat in order to compete with Facebook Inc (FB).
As Facebook continues to encroach on Google’s biggest strengths, Google stock investors are looking for an answer to help Google maintain or even gain market share in the digital advertising market. Google’s strength in search advertising is unparallelled, but it’s unable to keep up with Facebook in display advertising — particularly on mobile.
U.S. display advertising spending is expected to surpass search advertising spending in 2016, according to research firm eMarketer. Meanwhile, mobile display advertising has outgrossed search advertising for several years already.
Creating a popular social network with strong engagement is one of the biggest driving factors behind generating mobile display advertising. Facebook and Twitter are expected to capture one-third of the U.S. mobile display ad market next year. Snapchat, in just its fourth year of existence, expects to generate $300 million to $350 million in ad revenue this year — about the same amount Facebook generated four years in.
With increasing competition for mobile users’ attention and advertisers’ budgets, investors in Google stock are looking for a product from GOOGL to help it capture a larger share of the market.
Google Stock Investors Shouldn’t Expect a Unicorn
Creating a massively successful social product isn’t easy. Doing it twice is even harder.
Remember that Facebook acquired Instagram and WhatsApp. Twitter bought Periscope and Vine. Google is buying the guy behind a successful social media company, but Chris Poole isn’t a product. There’s no guarantee that he’ll be able to repeat his success with GOOGL.
Of course, GOOGL isn’t spending nearly as much as it would on an acquisition. It also has some groundwork laid with its existing Google+ and its more recent Google Photos product, which provides unlimited photo storage. Chris Poole will supposedly be working on projects around those products to help build a stronger community around them.
But if Google really wants to stop losing market share to Facebook and Twitter, it needs to create something new, not just iterate on their existing products. Note that not only has Chris Poole failed to create anything of particular noteworthiness since 4chan, but his recent startup efforts have all burned through their cash reserves.
Although he does have expertise in managing large-scale online communities, it takes both skill and luck to create successful communities again and again. That’s one reason why GOOGL itself has struggled to emulate the success of Facebook or Twitter.
So, while Chris Poole could lend some of his expertise to the Google product team focusing on sharing, photos and streams, it’s unlikely his presence will be the driving factor behind Google stock catching up to Facebook.
As of this writing, Adam Levy did not hold a position in any of the aforementioned securities.
