The Water Cooler: What’s Google’s Master Plan?

Every Monday, Bryan Glanzberg contributes The Water Cooler, a new column that bridges the gap between technology and business.

So now that the preverbial bubble has burst and Google’s shares have come down to earth somewhat (about $362/share down from it’s 52-week and all-time high of $475/share) investors are left wondering where this company is actually headed. Google developed their core competencies through online searching and advertising. Their business model was a new one to the industry and a very strong one at that. But now individuals are left to wonder where they actually are headed.

Over the last few months they have hired an extraordinary amount of new innovative minds (very reminiscent of the 90′s) and R&D spending and new technology development is at very high levels. What is truly interesting is that where Google developed their core through “business to business” revenues, they are now beginning to shift into uncharted waters and focus on the business to consumer industry. With the Google Video service, their new Paypal-like service, web editor, music service (which was said to be a rumor but it makes sense with the direction they are headed), and who knows what else, the general shift is towards the consumer and moving away from what made them a tech giant.

What is interesting, (and I would love some feedback on this) is if Google is trying to brand themselves as a household name or if they are truly trying to diversify their portfolio and minimize their exposure to risks in many different environments. I would venture to argue that they are focused more on diversifying their portfolio and dabbling in a little bit of everything. However, the problem with this is their cost structure. With increasing their labor force, they will need to ensure that the same principles that got them to where they are today are continually employed among the sub divisions (Gmail, “Gbuy”, Google Video, Music store, etc.)

Time will tell where they are ultimately headed and if they can continually add value to shareholders. Barron’s, argues that Google shares might fall another 50% due to litigation problems they are encountering in China, US, and other large countries. Although it is easy to focus on the nominal value of the share price, percentage wise, they have performed very poorly compared to Microsoft and Yahoo (over the last couple of weeks). Investors like stability, and Google is certaintly not what we would call the “Cadillac of investments”.

Source: Yahoo Finance