Google about to make a catastrophic mistake?
I just read via Jeff Jarvis that the $4 billion that Google intends to raise in a secondary share offering was cutely arranged to be exactly 14,159,265 shares. If that number seems vaguely familiar, that's because it's the decimal of Pi, to its first eight places (3.14159265).
Jeff writes:
"Am I the only one who finds that too-cute-by-half? If this bubble ever bursts and little old ladies are left penniless, this is the kind of arrogant business-as-playground that doesn't sound so darling on the other side of the curve."
I agree completely. Along with their recent shameful banning of CNET reporters, hints of Google's high internal arrogance are starting to add up and the blogosphere is duly taking note. This is a shame, because I think everyone really wants to believe in the "happy, innocent Google that can't help but make so much money by not doing evil" myth.
I try to look at all company interaction with the public, whether via PR, marketing, packaging,customer care, and yes, share registration documents, as part of a company's conversation with its public. It's all about the conversation, right? And what exactly is Google telling us with this kind of activity?
There are two fundamental risks with this disturbing hint of evolving company culture. The first is that as examples like the ones cited above leak out into the public, public perception of the brand is severely damaged. People may keep using Google, but they'll slowly and surely stop loving it....bad news long term.
But more near term, and much deadlier, IMHO, is that arrogance can cause companies to make huge, catastrophic strategic mistakes. AOL thought it ruled the world when it did it's horrible merger with Time-Warner.
Which leads me back to this $4 billion share offering Google is contemplating. Om Malik recently speculated that Google might try to offer free broadband via WiFi networks across the US to gain better user data and offer targeted location-based advertising- possibly called "GoogleNet". Reaction in the blogosphere (worldwide!) seems to have been very positive about this idea- check the positive comments: here, here, here, here, and many more here.
I don't really think this is such a great idea necessarily. How much money is being made in location-based mobile advertising today? How would these ads be delivered? To laptops? To mobile phones? How many wi-fi enabled mobile phones are out there? How many people walk around town with their laptops, looking for restaurants or checking directions?
What kind of network would Google offer? 80211.b or a or g? Would it be happy to continually have to reinvest in this network to keep up with ever increasing data speeds?
Weren't there many examples of startups that tried the concept of free network access in the fixed internet world, supported by ads only? Didn't every single one of these startups eventually die out? Why would the same flawed business model suddenly work better in the mobile space?
I think it's an intriguing idea, and maybe one that would eventually work out. Who am I to know? And power to Google for experimenting with these sorts of ideas, if indeed they are. Trialing in a city, with a network partner, for low cost- this is how you try things at very low risk to see where the problems are and how to solve them in a way that makes sense.
But when you see financing being raised for $4 billion, it sort of makes me wonder if Google are not planning a *big bet* move. Something that would be unnecessary, very risky, and based on theoretical market ideas (local ad market is xx billion, wifi is great, lets mash it all together by throwing billions at it!).
Making a big mistake would throw a lot of money away, divert management attention, and slow down momentum enough to allow competitors to catch up.
And to me, arrogance is just the catalyst that pushes companies over the edge into such mistakes...
I think Om, who often is good at pouring cold water on over-hyped ideas, sort of hints at this when he cites VC Paul Kedrosky speculating that so much financing could also pay for 5.4 million Blade servers, *and* the nuclear reactor to power them!