Almost all my experience with the investment community is from the research side, but I did once work on the propaganda side: investor relations [IR]. For a short time after the troubles began, I was ambushed into doing IR for the ill-fated shared-memory processing manufacturer Kendall Square Research.
And if you know the story of KSR, you know why I did IR only once and for a short time. So based on this meager IR experience, it was with wonderment that I noticed that Google (NASDAQ:GOOG) was letting two engineering VPs loose at a Goldman Sachs conference.
By just being there, Alan Eustace and Jeff Huber answered my question posed on seekingalpha on March 7: Is Google a media play or an IT investment? (And with the pending DoubleClick acquisition, add to that question the possibility that it should be measured like a large advertising/communications agency).
In addition to the implication of their presence, the engineers specifically said they are a technology company, and they want to be looked at as a technology company. I now accept that opinion based on the Google executives’ understanding of the advertising/communications business. I heard similar understanding from Gokul Rajaram, Google AdSense and display advertising product management director, who spoke earlier at JMP Securities.
At its core, classic Google is an advertising/publisher-specific standalone enterprise application, as optimized for its vertical as Fiserv (NASDAQ:FISV) is for community banking and much of SunGard’s software is for money-center banks.
Answering my own question from March, Google is not competing with McGraw-Hill (MHP) or Disney (NYSE:DIS). More on point, it is not competing with the classic horizontal search software from EMC (EMC) Documentum, IBM (NYSE:IBM) FileNet, Oracle (NASDAQ:ORCL) and so forth. In March, Eric Schmidt said the advertising revenue stream was just an enabler of Google’s software business (see the seekingalpha blog post referenced above). I think the same is true for the search engine.
Now it says it wants to compete with IBM, Microsoft (NASDAQ:MSFT) and others in the broader applications market. My new view of Google’s industry-focused strength raises some concerns in my mind about the company’s ability to go horizontal. Its experience optimizing the user experience for the targets of publishers and advertisers will help on the consumer application side.
But the idea that a company can leverage a narrow vertical expertise into supporting small businesses of all sizes a la Intuit (NASDAQ:INTU) or Sage is untested. I can’t think of any company that has done it.
On the large enterprise side, there is an application software supplier out of Walldorf, Germany that successfully transitioned from process-manufacturing-specific to broader industry and horizontal capabilities, so perhaps that company should be Google’s model.
A good time for the engineers to start thinking of this transition is Thursday May 31, 2007. On that day Google offices in 10 countries will host Google Developer Day, a global virtual event featuring workshops, keynotes and breakout discussions on Google’s APIs and developer tools. Focusing on the theme “Building Blocks for Better Web Applications,” Google Developer Day will explore innovative uses of Google developer products to create and enhance applications and integrate with Google services.
Google Developer Day will take place at Google offices and offsite locations in Mountain View, Sao Paulo, Madrid, London, Paris, Hamburg, Moscow, Beijing, Tokyo and Sydney beginning in Sydney on May 31 at 9 a.m. AEST and ending 27 hours later in Mountain View on May 31 at 7 p.m. PDT.
To reach developers everywhere, Google will offer live streaming webcasts from its Mountain View office and provide a YouTube channel with videos of Google Developer Day sessions at other sites. You can get more information or register for Google Developer Day here.