[Editor's note: We asked Kevin Laws, a former blogger at VentureBlog, to comment on the Google-YouTube merger. Here are his thoughts. Keep in mind that his company, Vast, can be seen as a competitor to Google Base]
Google purchased YouTube for more than a billion dollars. That “pop” you hear is not the end of the Web 2.0 bubble, but the end of the Google Myth.
The Google Myth is simple: to produce good businesses, hire the best engineers and leave them alone except for occasional priority setting. Most recently, engineers have been forwarding around this post from Steve Yegge, which contains an overview of Google’s management practices - admittedly, Nirvana for engineers. More than any other company, Google has promoted the myth that these practices produce good businesses.
Don’t get me wrong - good engineers, left alone with the right culture, can do great work. This is particularly true if they are the users of their own products and they have no partners or customers relying on strict deadlines. In consumer Internet, that’s largely true, and Google has some products that delight me. I use Google Maps, have a Gmail account, and use Gtalk.
All are great products, but none are very good businesses. Each has a tiny fraction of the market. “Who Will Win the Map Wars? Google or MSN” was the question people were asking recently. How about MapQuest or Yahoo, who between them have over 70% of the market - up from last year? Are you a Gmail user? Good, you can join the other 3% of people who are. Yahoo Mail added more users last year than Google’s entire user base. Gtalk? Great, enjoy talking to the other 44 thousand people using it regularly, or you could use AIM or Skype with over 40 million. In market after market, Google has made an innovative product and forced the other guys to improve. I thank them for that, but even after many years, the products have not turned into businesses.
Where Google does have good (ok, fantastic) businesses - search and Adwords/Adsense - the management techniques are less loose by necessity. Management takes a far stronger role in setting priorities. Google’s additional products are merely PR, done for the buzz.
That’s great for Google, because it keeps their name in front of you and keeps you using their search product. Those methods are not so great for the rest of us who rely on products to build businesses. The more pedestrian incremental features needed to create a business - the stuff the engineers hate - are left behind at Google.
With the purchase of YouTube, Google is admitting the Google Myth is false. Google already has a video service platform and the engineers to out-do YouTube technically. Instead, Google is buying YouTube for over a billion dollars. Now that Google’s management believes video is an actual business, they are looking outside Google’s engineering culture to build it.
The myth that a good product by itself is sufficient, so engineers should be set free from business folks, just went “pop”. Google joined the rest of us who are still searching for that ideal balance between business needs and the freedom needed by creative talent. Welcome to the real world, Google, and good luck keeping your best talent as you transition more of your products to businesses.
31 Comments
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Krish said:
I’d like to believe that too…!
But then there’s also a couple of other arguments.
Through this buyout Google can dictate terms to the rightholders as it gets to keep most of the Ad revenues from the videos.
Yet another development is that youtube had allotted some of its stock to a few big rightholders ( including Universal Music ) earlier during the day before it inked the deal with Google. This looked like a smart move and indications were that Google orchestrated this strategic exercise to obviate future litigations.
I think one should wait a while before getting judgemental.
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Weixi said:
how many yahoo! mail account users actually use yahoo! as their main account though? I have 7 different yahoo accounts just to do mock drafts in fantasy sports. I have 1 gmail account, and it is my main account.
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Jeremy Zawodny said:
Weixi: Given the nature of the site you appear to run, that’s hardly a shock.
Anyway, I guess you’d be surprised by how many people use Yahoo! Mail as their “main account” (by which, I assume you mean “email address”).
Why is that?
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Ragu Sivanmalai said:
While reading this article I want to invite users for a discussion in my blog
Can google get Gods mind?
This was one argument in 2004.I want to validate this argument with diverse opionions by comparing the current trends of google like the one which is described in the post above
http://ragusivanmalai.blogspot.com/2006/10/can-google-get-gods-mind.html
Come on Google users
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Ben said:
I’d like to point out the fairly obvious point that market share is not the only indicator of “business success”. It would be a mistake to relegate “PR” to a failing, or a diversion of some kind. PR is something of true value to a business, as evidenced by the amount of money business owners are wont to spend to cultivate it.
Motivating the marketplace to innovate is another thing I’d feel queasy simply disregarding as is done so by this author. In my mind, a business that has this effect is not only causing the entire consumer base to profit, (something I value), but it is again developing a positive reputation, and a reputation among consumers as a business that “leads the march”.
In general it seems misguided (jealous?) to accuse a terribly successful company of poor business practice. I must question the motives guiding the author to compose this piece.
As for criticism of the Google-YouTube buyout, I fail to hear the “pop”. If as the author has mentioned himself, Google engineers are preparing to improve the technical aspects of internet video, I don’t see why the tried and true trend of Google improving the marketplace has come to a halt. I don’t see this as an end to the era of well-treated engineers improving customer products with a less than obvious profit motive. Why? Why improve video technology?
If one feels that Google is a poor “business” (an idiotic, unbased claim) then again I am confused as to why criticism is being leveled at Google for an obviously savvy, business-smart maneouver like this.
Please, dear author, call the “pop” when it has happenned. And one last question, why the enthusiasm about announcing an end to well-treated employees? Is someone jealous about people with a better job position? Is someone eager to see the jobs of happy engineers reduced to the monotony and torture that you enjoy at your workplace?
Food for thought…
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Kevin Laws said:
Good lord, I hope I didn’t leave the impression that Google’s management practices aren’t good for Google or dismiss the value of PR or innovation. I have incredible respect for what Google has accomplished and don’t believe Google should be changing their own management practices.
The part of the “myth” I am addressing is merely that people are equating a good *product* with a good *business*. Google makes great products, and they are great PR for Google’s business - but they aren’t businesses.
People who try to import Google’s management practices wholesale to their own companies will find that they don’t work when it comes time to turn the product into a self-sustaining business. That’s the point I was making - that Google’s management practices have their time and place and work great for Google. But even Google doesn’t follow those practices when it comes to those products that are *businesses*.
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Paul said:
Nonsense. Google video lost because YouTube was a better product. Bad product = Bad business. A startup (founded by a couple of engineers) was able to create a better product than Google. What “myth” are you “busting”?
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Neil Kandalgaonkar said:
The Google Myth is simple: to produce good businesses, hire the best engineers and leave them alone except for occasional priority setting.
Ridiculous. “Myth” is the correct word. Google does not do this. It’s the exact opposite. Google differs from other companies by trying to make its engineers think about business value all the time.
Google Video versus YouTube is a more complicated story than management versus engineers. I don’t have the space to address it here, unfortunately.
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Neil Kandalgaonkar said:
The Google Myth is simple: to produce good businesses, hire the best engineers and leave them alone except for occasional priority setting.
Ridiculous. “Myth” is the correct word. Google does not do this. It’s the exact opposite. Google differs from other companies by trying to make its engineers think about business value all the time. Just like a startup.
That is the reason why they have all that freedom, and all those incentives! It’s to make the atmosphere startup-like, where managers are forced to involve engineers closely, and engineers know they can be rewarded for making creative decisions.
Google Video versus YouTube is a more complicated story than engineers versus management. I don’t have the space to address it here, unfortunately.
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James Aguilar said:
Kevin,
I see your argument about how a good product is not necessarily good business. Really, the question is, how do you define good? If you mean technologically superior, you may have something there. However, if you mean good in a holistic sense, then I don’t see what point you are proving.
Google Video may be a good product. Actually, it is really only “OK”. YouTube is a great product in that it is well designed and _meets the desires and needs of the customers_ much more than Google Video does. Even if Google Video is technologically superior, YouTube is still a better product.
And I’m also wondering what you mean by “Business.” I was at a recent talk given by Jawed Karim. Although all responses to financial questions were, “I can’t comment on that,” my understanding from other things I’ve read is that YouTube is not yet profitable. I wonder if the same applies to Google Video? What is “Good Business” to you?
Hope this helps,
James Aguilar
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Alex K said:
I think they bought it for the marketshare it had, not how skillfully it was engineered.
Also, I predict Google to apply all of those image and audio recognition technologies they’ve been developing on all of the videos posted. Think about all of the videoblogs and ads posted to youtube… there is so much valuable data waiting to be mined in those videos.
I’m too lazy to do the research, so I pass the torch to you.
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Alex Rodriguez said:
With the purchase of YouTube, Google is admitting the Google Myth is false. Google already has a video service platform and the engineers to out-do YouTube technically. Instead, Google is buying YouTube for over a billion dollars. Now that Google’s management believes video is an actual business, they are looking outside Google’s engineering culture to build it.
This is not new for Google since they have acquired other companies such as Keyhole in Oct 2004 in spite of Google Maps. I don’t think this is necessarily looking outside its engineering culture. Instead, when a team is that far ahead of their own stuff, the way to go is to acquire them, integrate with the acquisition, and leave any competition in the dust.
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Snappy! said:
I think Google Earth was also bought … and they recently bought Writely … so what’s new?
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Calin said:
PR wise, google never ceased to amaze, and that was heaven for the news-addicted digg-reddit-geeky minds. Plus of that, they dare to challenge existing cultures, and that opens door to innovation. Anyway, what would you do if you literally sit on a bunch of cash - why not throw it around at every crazy developer idea? The moment they are establish though, they die, so they keep up public attention alive via surprising moves.
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l said:
I hope you are not in a position where you need to analyze markets or use other sorts of vision.
Google is currently in the business of eyeballs (I will not speculate on future revenue sources,
but believe they can open some very important markets soon).This can be done on other websites or their own, the only difference is the cut.
Top engineers guarentee a top quality product - google search, gmail, gcal etc probably have a much higher retention rate than those other web apps you mentioned. When google bought youtube, your first reaction was not “oh no they can’t handle the server load” or “the ui will suck”. Google bought youtube because the market is worth it to them.
The “do no evil” and promotion of open source policies as well as efforts to show the web is a viable application platform is an indirect but important revenue generator.
Google cannot make all web applications, but they can make the tools, and if the subsequent application replaces a desktop one, Google just got a major source of income.
Read that last line again. Google makes money off of other people’s ability to make applications.
The more people get online, the more they make. The ROI is indirect, but significant.
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Yoav said:
I really don’t understand what the problem is. Every good engineer knows that if there is a software component that works out there - you buy it, you don’t recode it.
That is exactly what google did - buy a video sharing component (traffic inside).
Classic engineering behavior or - The Kevin argument goes “Pop”.
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Jyotheendra said:
Enough Guy’s,
Best products win, No matter where they come from….
who would have imagined in 2000 that a company that Indexes web pages and had no business model would be worth more than GM.
you know whom I am talking about..? -
Jim Bay said:
Do I hear you crying like a little baby? Any company that causes other companies to improve their products can’t be all bad. The alternative is to let companies like Microsoft sit on their cash cows with no incentive to innovate.
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Goran Zec said:
I think that the myth is alive and well. Google’s engineers may have failed in creating the community comparable to YouTube, but if they had the money to simply walk in and purchase it, they must be doing something right.
Also, Gmail is not about the volume of users. It’s about the volume of data and how they mine it.
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David Rainsford said:
What about the possibility that they bought youtube because a copyright lawsuit against youtube could set unfavourable precedents for google, and so by buying them out they can use all their cash and lawyers to fight youtube’s battles in court.
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Nilay said:
I have reservations against this article when the writer pulls up data regarding people opening up account in yahoomail vs that in gmail. First, yahoo is much older than gmail, hence for obvious reasons, it would have higher market share. Second, you can open gmail account only through invitation, unlike yahoo. Third, many people have multiple accounts in yahoo to have multiple chat Ids, but their accounts are created mainly for chatting purposes. So we don’t know actual no. of users who are using yahoo vs that using gmail. Also, we don’t know the growth rate of no. of users in each case.
When the writer talks about map feature of google, he again misses the arguement that yahoo is very old player in this field. At present google is definitely giving hard time to yahoo through satellite map features. If yahoo is to build its strategy based on moves of google, it is indeed indicator of success of google.
Last but not the least, market’s faith in google (in terms of stock value) is a good indicator that google is not just myth, it is a promise for better future.
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Andrew Collez said:
The last time i accidentally clicked on an Adsense ad link was 18 months back.
When was the last time you clicked on an Adsense ad link?
If you and me are not clicking on Adsense links then who else is clicking on them?
6 years back i was wondering the same about banner ads…… then the truth came out….. history repeats itself…..
The reality is when you publish a webpage it is accessible to all people around the world, there is nothing called a channel in www/internet, hence nobody can collect rent on channel. Reality is traditional channel media advertisement paradigms does not work on www/internet.
It will take another 12 months for people to realize this…… Google is hot potato till then…..
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Shivaji said:
Nilay,
Yahoo might have more marketshare, but the statistic in the article was about more __NEW__ mail accounts being created in the last year, not overall number, so Yahoo being old has nothing to do with it.
“Second, you can open gmail account only through invitation, unlike yahoo. ”
So what? This just means that Google made a bad business decision.
“Third, many people have multiple accounts in yahoo to have multiple chat Ids, but their accounts are created mainly for chatting purposes.”
You can create upto five different profiles for chatting on yahoo without a need to create mail accounts for each.
“So we don’t know actual no. of users who are using yahoo vs that using gmail. Also, we don’t know the growth rate of no. of users in each case”
We may not know the exact no. of users and precise statistics and trends, but we have a general idea and estimates, which is what the article talks about.
About maps features, it’s net savvy people like me and you who use things like google maps, but we are like 1% of web surfers, they go with what works best for them. If it’s good enough, they go with what they’re used to, if google comes up really better (like at search), they might use google’s features. With yahoo maps beta coming up with AJAX features, I don’t think too many will make the switch to google maps.
“If yahoo is to build its strategy based on moves of google, it is indeed indicator of success of google.”
This may indicate technological success, which doesn’t always translate to financial success, which is the whole point of the article. There are thousands of bankrupt companies which achieve technological success.
“Last but not the least, market’s faith in google (in terms of stock value) is a good indicator that google is not just myth, it is a promise for better future.”
I think this is the least valid point in your comment, because many people who invest in stocks just go with the market hype. The dot com boom was a good example of this, and there was no better future inspite of spiking stocks.
Not to mention other such examples like Enron. Google executives have dumped around $7.4 billion in google stock to cash on the hype. You can read the article about it here
http://australianit.news.com.au/articles/0,7204,20177475%5E16681%5E%5Enbv%5E,00.html -
opengl_programmer said:
that is a good question? WHO is clicking on all those banner ads? is it all the techies or is it all the average joe user who is click happy? its surely not me i know that for sure.
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Weixi said:
Jeremy: my main point was that newly Yahoo! email accounts are quite misleading as most Yahoo! services require registration that automatically creates an email account for the user. Fantasy Sports account limits is one. Bookmarking is another. Creating separate IDs for chat is another, and so on. I don’t think it’s too far fetched to say that a majority of the Yahoo! email accounts are not even used.
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Nilay said:
Shivaji,
Consider these points:
1)Yahoo is able to get more customers because it has been into this business for long and has been operating successfully. It is not impossible that gmail cann’t surpass yahoo. Google compelled yahoo to provide more memory for email account holders.
2)Google might not be competing to get high number of gmail users. Without knowing their business objective, I cann’t comment on their business strategy.
3)Google is not going to indent Yahoo’s map market share overnight. Google would eventually come with its own technology as well. So let us leave it on time to see how much dent google makes in that segment.
4)Enron and IT bubble burst in early 2000 are not frequent events. Examples where stock values reflect real status of company outnumber examples where stock market show inflated confidence in the company. Exceptions aside (like Enron), we can say that google comes up with lot of promise.
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John Bradford said:
Oy, I hope you are not making business decisions based on ComScore data. Their stats have been inaccurate again and again. Take their recent claim that more than falf of MySpace visitors are now age 35 or older, which was debunked. It appears Yahoo management is making the same mistake, and is then surprised when their predictions are far off the mark.
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Morgan said:
YOAV,
“you buy it, you don’t recode it.”
Google already did recode it. His point is that even with their resources they couldn’t beat YouTube. His argument had nothing to do with what you wrote, so I don’t see how it ‘popped’.
In fact none of the article is a knock on Google’s products, it just makes a point that Google’s secondary products are not great businesses. If you can find evidence that GTalk is a cash cow, for example, go ahead and pop his argument away.
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Morgan said:
Another thing, how many GMail accounts are just for online storage, and how many are just for spammers to test filters? I have far more GMail accounts, at least 3, than my one Yahoo account. They have the same issues counting users that any other mail provider has.
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Weixi said:
Morgan wrote:
> Another thing, how many GMail accounts are just for online storage, and how many are just for spammers to test filters?http://en.wikipedia.org/wiki/Straw_man
Who do you really think has the greater empty:active account ratio, Yahoo! or GMail? I find it difficult to believe that you did not find the statistics of Yahoo! Mail sign-ups to be wildly misleading.
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Vaha said:
just test soft-a :))))
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Peni said:
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5 Trackbacks
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Nice to see Steve Lacey again, he’s at Google now « Scobleizer - Tech Geek Blogger said:
[...] Oh, while we’re talking about Google, might as well talk about Kevin Laws’ rant over on VentureBeat: The Google Myth goes “pop.” [...]
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kenspeckle » links for 2006-10-25 said:
[...] pop goes the google myth implications of the youtube purchase (tags: youtube video google search business work workplace technology) [...]
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[...] [Editor’s note: We’re bringing back blogger Kevin Laws for a second post, given that his one yesterday stirred the crowd. This time he writes about click-fraud.] [...]
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