A shrinking world got considerably smaller on Wednesday. Google, a company spawned in a garage of two university students in California just seven years ago, announced a new service that will allow you to telephone your mother in Australia free of charge, as long as she too is a Google user.
That is just the start. The company, with a market capitalisation of $78-billion, has ambitions to colonise the living room and to apply the phrase ”to Google” to every activity that occurs within it. In addition to the telecom move, it also launched an improved version of its desktop search software this week that helps users to organise all the files on their computer and constantly suggests useful web links and documents pertinent to whatever you happen to be doing at the time.
The rate of new launches has increased further since its high profile flotation last year. With each new service, Google and its student founders, Sergey Brin and Larry Page, encroach a little bit more on the territory of Bill Gates and Microsoft, the software giant that powers 95% of the world’s computers. The question now is whether the young upstarts who have built a hugely profitable business on Google’s anti-corporate image are on the way to following Microsoft’s founder’s path from bright young turk to monopolistic behemoth.
Interbrand, a company that measures the relative worth of the world’s main brands, calculates that Google is the 38th most valuable, at $8,46-billion. While this is a long way behind Microsoft, estimated to be the second most valuable brand, at $59,94-billion, Google’s ascension is remarkable for a company that is so young and has spent next to nothing on marketing.
Already there are whispers in California’s Silicon Valley that it is becoming too much like Microsoft, the technology firm that every teccie loves to loathe. While there is a significant crop of sour grapes in the mix — not helped by last week’s news that Google is selling a further $4-billion worth of shares to fill a ”war chest” — Google is also attracting unfamiliar epithets such as ”arrogant”.
Its sheer financial power and need for engineers to create new products has sent salaries in Silicon Valley rocketing, as it poaches staff. It has already ended up in a court battle with Microsoft over the fate of Dr Kai-Fu Lee, the developer of MSN’s search engine, whom Google poached from the Seattle-based software giant.
Dot.com start-ups are also finding it increasingly difficult to persuade potential financial backers that their prospective markets will not be squashed by the might of Google.
Gates put the knife in earlier this year when, in an interview with Fortune magazine, he said Google was ”more like us than anyone else we have ever competed with”.
Microsoft and Google are battling it out for control not only of the way we use our computers, organise and retrieve information and communicate, but ultimately for the way we consume audio and visual entertainment content and make telephone calls. It is a battle that will take place on a global scale, from the US to Europe to the far east and the huge emerging market in China.
Julian Smith, European online advertising analyst at Jupiter Research said: ”Google has evolved from a technology provider into a media owner; now they are evolving and trying to expand that into a portal play, offering additional functions and functionality to try and emulate the likes of MSN.”
There is a lot to play for in the online advertising market. Paid for search, in which advertisers pay to have links to their websites displayed alongside search results, is the fastest growing segment of the market, which itself is growing faster than print or television advertising.
Last year the online advertising market was worth upwards of $15-billion worldwide, with paid-for search accounting for just under a third and Google taking the lion’s share. It made $3,2-billion in revenues.
”The battleground between Google, Microsoft and also Yahoo! is trying to get the hearts and minds of the online user. It’s about maintaining search loyalty,” Smith said.
Google’s expansion comes at a time when media, entertainment, internet and telecom companies are increasingly treading on one another’s toes. Industry analysts believe that there are signs that the long mooted convergence between various home entertainment devices and technologies is finally coming to pass.
”That’s the key battle, the battle for the home,” said Jerome Buvat, a strategic business consultant in media, telecoms and entertainment at Cap Gemini. ”You’ve got mobile operators offering access at home, unbundlers [new companies taking advantage of regulatory intervention to access telephone exchanges] offering triple play services and incumbents offering a range of services from home security to video on demand.”
Microsoft and Google are far from the only companies involved in this battle. The News Corp mogul, Rupert Murdoch has set aside $2-billion to accelerate his online ambitions. Under the leadership of a former Hollywood executive, Terry Semel, Yahoo! has been reborn and has similar ambitions to become the jumping off point through which people access entertainment, music, community and communications services. It has already launched a telephony service in the UK.
Yet industry experts believe Google is still set fair. Telecom analysts Ovum said: ”If Google succeeds in converting enough of its Gmail users to Google Talk PC phone customers, it has the brand strength and market presence to move into a much broader range of multimedia services.
But given its newly inherited responsibilities to shareholders, some analysts wonder whether Google might repeat the mistakes of its forbears. Its critics point to the way in which it is starting to behave more and more like the conglomerates it once sought to differentiate itself from.
”Everyone loves a great story,” said Rita Clifton, chairperson of Interbrand UK. ”It’ll only become a problem if you start looking like a mega corp. They are walking a delicate tight rope.”
The giants in numbers How they shape up
Google
- $10bn — Estimated worth, each, of Sergey Brin (31) and Larry Page (32) who launched Google commercially in 1998
- 229% — Gain in share price on first year as a publicly quoted firm: from $85 to $280
- 98% — Gain in revenue after first year as a publicly quoted company
- 4 183 — Staff worldwide
- $399.1-million — Company’s 2004 net Income
- 60% — Proportion of people using the Google search engine for online search inquiries in the UK. The figure for the US is 36,5%
Microsoft
- $46-billion — Estimated worth of chairman Bill Gates (49) who founded the company in 1975
- 294% — Gain in share price on first year as a publicly quoted firm: from $21 to $82,75
- 59% — Gain in revenue after first year as a publicly quoted firm: $94-million to $143,8-million
- 57 000 — Staff worldwide
- $12,254-billion — Company’s 2005 net income
- 10% — Proportion of people using MSN Search, Microsoft’s search engine for online searches in the UK. The US figure is 15,5%
How VoIP works
- People can chat to friends on a telephone headset or phone connected to their computer without using phone companies and incurring charges.
- By downloading free software from Google’s website, users will be able to use the service to talk to friends. It will show when people you have added to your electronic address book are online, so you can instantly click and chat.
- The system uses Voice over Internet Protocol (VoIP) which, in simple terms, turns your computer into a phone.
- It takes analogue audio signals and converts them into digital data that can be transmitted over the internet. This is converted back to an audio signal at the other end. – Guardian Unlimited Â