I just contributed a comment to a story on Digg about Google, and how many of their recent experiments aren’t doing so well, in which I give my humble opinion as to why that might be:
Google is trying to do what companies are supposed to do when they get that big (according to their investors) – diversify. Unfortunately, Google is probably suffering from the same problem that most big companies suffer from when they try to diversify – they aren’t very good at it.
The diversification strategy is based on the premise that to get big, the company must have some kind of magic that other companies don’t have, and that if they apply that magic to other problems, they can conquer them too.
The problem with this is that magic has a relatively short shelf-life, and Google’s has lasted longer than most. Larry Page and Serge Brin has the foresight to take a great algorithm that solved a real problem, execute it almost flawlessly, and build a great company around it. Expecting them to repeat this feat over and over again may be too much.
I don’t think this is so-much a bug in Google, as it is a bug in what investors expect of the companies they invest in. They yearn to see the same returns in the mid-life of a company as earlier investors did in the company’s early life by having the company try to conquer new markets.
In essence, they want the reward, without the risk of placing an early bet. The result is that they often manage to kill great companies with great business models by forcing them to chase dreams while neglecting the golden goose.
Find the Digg story here.