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Posts Tagged ‘Google’

Google Vs. Amazon.com: Episode 8

December 6th, 2011

google vs. amazon.com internet equity researchInvestors long accustomed to thinking of Google as the leader in online search and Amazon.com as the king of commerce may be surprised to learn of the growing rivalry–some might say hostility— between the two companies. Only last week The Wall Street Journal suggested that Google may be speaking with brick and mortar retailers about a one day shipping service that would up the ante on Amazon’s two day free shipping service, which it provides to its most elite customers. If the report is true, one would surmise that Google could only have had the intent of taking Amazon off guard, in advance of the critical holiday shopping season.

Given the vast no man’s land which defines the border between ecommerce and online search, one may ask where the seeds of this now bitter rivalry were sewn.

We would speculate that it began with Google’s bold online book initiative, in which it sought to scan the world’s out of copyright book collection ensconced in the bowels of the nation’s great universities, including the University of Michigan. With the intent of making hard to find texts available online for the first time, Google’s ostensibly altruistic effort, lauded by researchers, became the object of scorn among the world’s publishers and authors who resented Google’s efforts to corner the market on out-of-print, and out-of-copyright books, without due consideration to paying author royalties.

Amazon.com, no doubt looking to fend off a challenge to its position as the world’s dominant online book reseller—which, by the way includes used, out of print, and out of copyright books—saw it as an obvious threat to its franchise. Thus, it joined forces with Microsoft and others to fend off the Google challenge.

To make a long story short, a period of détente began to emerge between Google and Amazon.com when Google sensibly abandoned or at least temporarily suspended its book initiative. Amazon.com, in keeping with its sophisticated yet sphinx-like approach to ecommerce (see Amazon.com: ecommerce Sphinx), began to sell Google’s internet PC on its website. Amazon.com, in a gesture of rapprochement, selected Android as the operating system for its new tablet, the Kindle Fire.

Dissatisfied with the pace at which the rest of the world was adopting Android, Google suddenly, in our opinion, lost patience with the pack of Android licensees, and purchased, out of left field, Motorola’s Mobility unit, whose Xoom tablet places it in direct competition with not only Apple, but Amazon.com.

Thus, the ante has been upped in the tablet wars, with Amazon.com’s Kindle Fire an increasingly sure bet to become the number two tablet in the next 12-18 months. This probability may have been realized only recently by the Googlers, and serves to explain—or at least better understand—its controversial decision to acquire Motorola’s phone and tablet group.

Mr. Zuckerberg’s Visit to Cambridge

December 2nd, 2011

Mr. Zuckerberg's Visit to CambridgeFacebook founder and CEO Mark Zuckerberg recently visited Cambridge MA, where he spent time at MIT and Harvard, speaking with students and recruiting for his company. While in Cambridge, Zuckerberg, who started Facebook in his Harvard dorm room, said that while his company wishes to tap into the local talent pool, Facebook has no near term plans to open an East Coast office.

We would not, however, be surprised to see Facebook make an about face on that decision.

Mr. Zuckerberg may soon come to the same conclusion reached by many other Silicon Valley leaders, namely that the West Coast talent pool is a finite resource from which to draw. Moreover, many of the most talented engineers and entrepreneurs—for a variety of reasons—may not be interested in leaving the East Coast.

Mr. Zuckerberg may well conclude that his best bet for recruiting local talent may be to take a page from Google’s playbook that will give Facebook a ground-level presence in what is widely considered an area rife with talent.

Google began its New England presence with a modest outpost in Cambridge, and after building up a relatively modest staff announced in July of 2010 that it would acquire ITA Software, whose specialized search algorithms for the travel industry have since been subsumed into Google, albeit after a lengthy anti-trust review. In one fell swoop, Google acquired a local company which it will use as a base for future recruitment.

Facebook’s near term expansion plans include opening an office in Seattle, which Mr. Zuckerberg notes is less than a two hour flight from Palo Alto. Our sense is that this may be a short term palliative to what may become a longer term growth issue: how to attract and keep the best talent independent of geography.