To paraphrase William Faulkner, I do not know what I think until I read what I wrote. Reading yesterday's post got me thinking about Google. In yesterday's post I wrote:
"I have been using Feedly as my RSS feed reader since Google shutdown Reader (which prompted me to use single product companies for all my important apps, e.g. Dropbox, Evernote, etc.)."
There are two exceptions to my use of apps from single product companies:
- Microsoft Office
- GMail from Google
However, maybe these companies are single product companies or should be.
As the market has evolved Microsoft has become a two product company--Microsoft Office and gaming. Office is reportedly the largest profit generator and gaming is in many ways the product new users see. I do not believe there are any real synergies between the two product lines except that both products require excellent programmers. Therefore, logically they could be separated into two separate companies and some say more value would be created for investors.
The Google case is a bit more complicated. Google has two major products in my opinion:
I think the jury is still out on Google Drive. If I did not use GMail on my phone, I would see no benefit to Google Drive over Dropbox or Evernote or 20 other products. (Opening a doc attached to a GMail and storing it for retrieval from the iPhone is easiest with Google Drive.)
I would love to ditch GMail in favor of a standalone mail app, but the ten new mail apps I try each year always have problems that bring me back to GMail. Would I give up Google search? Yes, in a minute. Google works and it is a little bit better than Bing and all the others, but I am nervous about how much Google knows about me, the search still lacks a lot of features I would like to see (e.g. academic articles showing up as preferred results based on my profile), and the ability to restrict sites from showing up in the results (e.g. Entrepreneur magazine).
Search and GMail probably have more compelling common characteristics than Office and gaming. The common characteristic is the use of artificial intelligence (AI) where GMail offers comparatively better search because of Google's expertise. However, I suspect that search is not a sustainable advantage in mail apps. I suspect that Amazon could duplicate high quality mail search in a year or less given their own work on search. Also, I suspect the mail search would improve faster if that was the sole objective in improving the AI. What this logic argues for is that Google should spin out GMail as a separate company, leaving Google as an AI/search company. (The spinoff agreement could still give Google certain exclusivity for a pre-determined amount of time.) Given the increasing popularity of notifications and messaging apps, GMail may be at its highest possible valuation today. Driverless cars and 100 other products based on AI could all be spun out. A more narrow focus to the continued development of the specific AI would probably produce better results (which Google could license back in the spinoff agreements).
If Google and Microsoft were to follow my advice and each spinoff one of their two major businesses, then almost every major software applications company would be a single product company. Hmmm, interesting.
Note: One could argue that both search and GMail rely on expertise in distributed processing, cloud computing. Therefore, they should not be separated. Were this to be the strategic insight to explain Google's development of both products, then Google has a much bigger issue because abnormal returns, even with scale, are quickly disappearing from the cloud space.