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Thursday 4 December 2008

Why Google has already passed its peak

Since it was founded in September 1998 by Sergey Brin and Larry Page, the California-based search engine has become the world’s most breathtakingly successful business. More recently, however, it has also been getting stranger and stranger. It agreed to allow its Chinese site to be censored to stop Chinese surfers stumbling across sites mentioning such dangerous things as democratic elections. It has been threatening publishers with destruction by putting entire books online for nothing, and sending out lawyers’ letters to anyone who uses ‘google’ as a verb. In effect, Google is showing signs of the corporate hubris that often afflicts organisations that become very successful very quickly. Most worryingly, perhaps, some people in the technology world are starting to wonder if the mighty Google edifice might not have a few cracks in it.

Take Henry Blodget, for example. At the height of dotcom mania, the Merrill Lynch analyst was a famous cheerleader for the internet — until he earned himself a lifetime ban from the securities industry. He is still reckoned to be one of the more intelligent observers of the industry, and he has turned into one of the leading Google bears. ‘The single source of revenue is a weakness, although given the strength of that revenue, most companies would obviously kill to have this problem,’ he said recently. ‘The risk is that any slowdown or hiccup in online advertising ...will kneecap both profit growth and the stock price.’

Nobody would deny Google’s success. Still only eight years old, it ranks as the 31st biggest company in the world. With a value of $125 billion, it outranks Vodafone and Coca-Cola. Its sales have grown by more than 50 per cent a year. So who could possibly bet against it? Surely world domination is just a mouse-click away?

In truth, there’s plenty for Google to worry about. What made it such a success was that its search engine was so good at finding what you were looking for without cluttering up your computer with irritating ads. The trouble is, the engine is open to manipulation, or what’s known as ‘google-bombing’. For example, tap in the word ‘liar’ and you get Tony Blair’s official website. That is merely a squib — planted by a vengeful Brownite perhaps — and you may think it’s a fair result. But the same techniques can be used more subtly by armies of search-optimisation specialists who make a living by pushing companies higher up in the Google rankings.

Some people are starting to catch on. Earlier this year the Wall Street Journal’s influential tech columnist Walter Mossberg argued that for some functions Ask.com is now a superior search engine. Ask has only 6 per cent of the global market, compared with nearly half for Google, but internet-savvy users are starting to switch. In time, the mass market may catch on as well. In July the web ranking firm comScore found Google’s US market share starting to slip.

More articles from: Matthew Lynn | this section

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