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Google Picks Fights in OS, Apps, and Phones: What's Next?

  |  December 18, 2009   |  Comments

Google's Chrome operating system is seen by many as a high risk move, but one with a potential for significant opportunity.

There is no doubt about Google's lead in the PPC (define) search market. Google controls more SERPs (define) than anyone by a factor of three. Yet, Google isn't content to dominate the SERPs on computer screens. It has released and announced products that put it in direct competition with a variety of powerhouse companies in the cell phone and operating businesses in particular. As a paid search marketer, you may wonder what any of these side businesses have to do with your search campaign. Potentially, they have a lot to do with it. In particular, Google's OS and Chrome business units are designed to dramatically increase switching costs and stickiness. Unlike Microsoft, Google isn't required to adhere to a consent decree, or have browser distribution restrictions like Microsoft now does in the EU.

Until recently, Google didn't spend much on advertising, particularly traditional advertising. However, that didn't stop it from engaging in major marketing initiatives to get its browser and toolbar distributed, either through OEM PC manufacturers or via piggy-back install options on other software products (install a piece of free or paid software and the Google toolbar or Chrome are included as an option). This marketing activity is certainly at least as aggressive as advertising, skipping the brand building objectives to go directly to a semi-permanent presence on the consumer or business-person's PC. Nothing is a more permanent part of a PC than its operating system (a principle that has served Microsoft very well over the years).

Google's announcement of its own Chrome operating system (OS), to be paired with the Chrome browser, is seen by many as a high risk move, but one with a potential for significant opportunity. One thing that has always been true, of computers in particular (and, more recently, with technology devices in general), is that consumers buy based on functionality. The PC (or, for us old timers, the IBM PC) has always led in functionality due to a huge developer base and great applications. Apple computers only took off when Microsoft Office became fully cross computer functional, and when OS10 was able to emulate Windows better, because these advances allowed Apple enthusiasts to get the "best of both words." The iPhone is more than just cool; it's a small computer and Web browser. Facebook, the iPhone, and other platforms have proven that an open and easy-to-code application development framework provides a catalyst for smart coders of any age to develop applications people love.

But Google is already seen as very powerful, given its dominant market position. So, going into the cell phone, browser, OS, VoIP phones, "office" applications and, of course, display advertising market has risks as well as rewards.

What are the risks for Google? Here are the main ones:

  1. The Department of Justice: Google is already under intense scrutiny by the DOJ and its move into the OS market may further stimulate the attention of regulators.

  2. Failure to gain penetration: Google is already at risk of being seen as a one (or two) -trick-pony with respect to profitable businesses (paid search/contextual and auctioned display media). An operating system is an expensive direction to go if it results in failure. Google's foray into TV, radio, and print advertising didn't go well (although its ad exchange is gaining momentum).

  3. Viruses: Need I say more?

The irony is that Microsoft has already started its move toward cloud computing and it would be interesting to imagine a world where a Chrome browser running on a Chrome OS was being used to access Office Live applications purchased from Microsoft on a subscription basis. In the end, even with the confusion that new product launches bring, the consumer becomes the ultimate winner, and marketers simply need to figure out how to follow that consumer around with relevant marketing messages.

The fact that Google needs advertising to support all of this new development brings us to the specter of government regulation of targeting cookies -- even when those cookies contain no personally identifiable information (PII). Let's hope the industry as a whole is successful in thwarting regulation. I'm cautiously optimistic with the Interactive Advertising Bureau's "Privacy Matters" campaign, which features ad creative such as: "Advertising is creepy" and "This banner ad can tell where you live."

For next year, one can only expect that Google will continue to dominate the market within paid placement search, and unless Bing or a new competitor comes along and figures out how to change user behavior, we can expect Google to continue its dominant market share position. Consequently, Google finds itself in a strong position to fund these and other experimental initiatives in its product pipeline.

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ABOUT THE AUTHOR

Kevin Lee

Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.

Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.

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