When Google started as a young company, we at AOL did one of the first tech and distribution deals with them. Google displaced Excite and other numerous search suppliers to us at AOL. My name was on that first contract between AOL and Google. I was there. We also made an investment into the company. They insisted that they were merely an arms dealer for technology, they would supply us with algorithmic search tools ONLY. That would be their business and they would power our branded search only. I went with one of the founders of Google on the original press and analyst tour to announce our deal and spent quality time talking about Google’s horizons. They were modest and humble; and they were focused on one app.
They were our partner, they were transparent and they would be an insider ingredient product, not a consumer brand. They would stick to their knitting. AOL got Google lots of audiences and value – and we made a smart investment and made billions and billions of dollars in equity gains from our investment. We had a great working relationship. But AOL was the buyer and Google was the seller. AOL was the big player and Google was the upstart. (Later, I worked with Google to make an investment into AOL when we were part of Time Warner – how the tables had turned.)
But Google also worked with lots of other partners and of course had its own site. And it started to move slowly into adjacent opportunities. Consumers could get Google tools via Yahoo, or AOL, or thousands of other sites – or they could just go to Google.com. They had universal appeal and reach. AOL generated about 15 percent of their overall business. We were big and important partners to Google. And there were many competitors to Google as well. The search business reached $500 million in revenues to AOL.
And then slowly Google started to add new core functionality – mail. That was an obvious one. AOL and Yahoo were the huge email suppliers to consumers, but Google had an obligation to offer mail. Messaging of course was next. AOL invented instant messaging and owned AIM, but once you are in communications with mail, you have to offer instant messaging so said Google. Mapping was then added – AOL ownedMapquest. Blog hosting, and publishing tools; operating systems for mobile – AOL owned Tegic. Calendars – AOL had a calendar. News – AOL was the news leader online along with Yahoo. Google Play, YouTube – AOL had its own video playback, AOL TV, AOL By Phone, and movie sites a la Moviefone. We were the leaders in online content via AOL Studios. We had created the first digital wallet – and here came Google Checkout, and on and on.
You get the point. Google was more than anyone thought – the experts were caught off guard. Google was much more than a search engine. Google did what AOL did and Yahoo did, but for free and in many cases, better.
What started out as a tools supplier for algorithmic search with one killer app – which was looked at as a niche little company – morphed into the company that ate the industry and created the most value. It morphed from an algorithmic search supplier to a platform and OS company – from cpc to cpm and cpa ad models to a mobile core functionality company – to a media giant. Hello Google TV, hello Google Fiber. They’re now a true tech company with almost 80 percent share in search and they’ve become one of the most profitable companies on earth.
Google is valued at $232 Billion today – its stock is priced at over $700 per share. When it went public it was in the $80 per share range. At IPO, it was considered over-valued. Do you remember that noise generated around the Google IPO? I do. Google has more than 1 billion users around the world now.
It executed well – it had a killer app. It built trust with consumers and just added slowly and methodically functionality and technology on a global basis and now it is like oxygen for the industry and for consumers – “you best get used to it.” And the nay-sayers around Google… they lost out in every way – reputation-wise and economically. No one can even remember those days and those critics any longer.
I see a lot of similarity here in the next big opportunity of the intersection of where local meets social meets, mobile and e-commerce. Experts sometimes lose the forest from the trees.
Today, so called experts sneer at this market as a “deal of the day” business, based on push permission-based marketing via email. This business has probably reached $10 billion in overall – billing worldwide faster than any other industry by many, many key players. One player has emerged as an overall leader with scale. The overall audience is in the hundreds and hundreds of millions of consumers on a worldwide basis in less than five years. But it is early as there are more than 2 billion people connected to the Internet. It is early days for local, mobile and social shopping.
But soon you will see the leaders getting into pull marketing, where deals are banked and offered as a web service – not on a daily basis but on an ongoing basis. He/she who has the most deals banked will be advantaged I believe. And deals with be offered in real time as merchants wish to be smart and deplete inventory on an as-needed basis. And personalization will be more and more refined for consumer benefit. Utility will be offered for consumers who buy things on an ongoing basis and want convenience and best prices with regularity and schedule, and rewards will be offered for ongoing purchases.
We will see group buying power to benefit organizations and a real industry verticalization, which we are seeing already in travel and ticketing and more and more niche categories. Physical goods and products will be sold at a discount in an aggressive way. Digital goods will be next. We will see new forms of payments emerge – new services for merchants emerge such as scheduling and light touch products to sell small amounts of units as needed. Reservation systems will be updated – self provisioning capabilities will be offered so merchants can program the deals themselves.
We will see more and more technology provided for free to merchants to help them manage their stores in the real world and online. We will see a redefinition of who a seller is, from a merchant to a consumer who is doing commerce on the web. We will see a morphing and blending of local commerce to be both B to C and then B to B. THIS is huge – when business-to-business enters the picture. And don’t forget the Fortune 1 customer – the government – as they are just modernizing and starting to buy online. Auctions and marketplaces will be added to this mix.
Scale will win out. Platforms will win out. Customer file size will win out. Having people who are best at where liberal arts and technology intersect will win out. First mover advantage will be rewarded. And what was once looked at as a tiny direct marketing coupon-like business and industry will be seen as a next generation biggest new industry ever created – where social, mobile, local and e-commerce intersect.
The bloggers that create tiny sites with no revenues to speak of will have moved on to the next industry and set of companies to sneer at. Remember what was written about e-commerce and Amazon (“it is only an online bookstore”) ten years ago? How did that one turn out?
We are in the early days of this new industry. There is always more than there seems – that is what history has shown us. Google and Amazon turned tiny little ideas into huge businesses via smart planning, great execution, big funding and terrific technology roll-outs. They also smartly expanded into adjacent opportunities. They were NOT highly regarded early on by experts –but the people that believed long-term were greatly rewarded.
I believe we are seeing the birth of something huge, big and rewarding. The higher calling of “deal of the day” is where social, mobile, local and e-commerce all intersect – on a global basis. Where the service is both needed and loved. Where share of wallet spending is in the 80 percent range and this industry becomes the platform and engine in how people live their lives and spend their discretionary dollars.
A big agenda here. There will be some huge new winners. The industry is just getting started. Those who forget the past are doomed to repeat it.