Tech Town, NC

No one is sure when it will happen, but at this point it’s almost certain Google will announce a mobile device to debut sometime in the next 6 months. Just like everyone else, I’ve read the rumors about what it will do and look like, and what it will mean to Google’s competitors. And that got me thinking. How does this change the game, and what is Google’s new role in the world of technology? The more I thought about Google’s business model and strategic moves in the past, the more I kept thinking of one company: Wal-Mart.

GASP! But I love Google! And I hate Wal-Mart!

Before you get too worked up, understand that I’m looking at this only vis-a-vis the business strategies and implications, not making any value judgments. The Economist actually has a great article on much the same topic, giving an objective look at Google’s business model. If you think I’m crazy, just answer these questions:
1 - What company has been able to give products away for free or with deep discounts and make money on sheer volume?
2 - What company prides itself on a barebones, minimalistic style?
3 - What company has entered new markets aggressively and disrupted multiple other industries?
4 - What company has applied for a license to operate a tightly controlled industry that many would say is not it’s core competency?

The answer to these question could be either Wal-Mart or Google.
1 - Wal-Mart, while not giving anything away, sells generic drugs for $4 to get people in the door. Google provides Picasa, Google Earth, Google Calendar and now Star Office for free as part of the Google Pack and makes money by controlling 70% of the search market.
2 - Wal-Mart’s overstuffed aisles are as bare bones as retail gets. Google has avoided Yahoo-itis and kept its search interface clean and Spartan. Also, Google Docs is fairly dry compared to MS Word (though that will likely change).
3 - Wal-Mart is now a pharmacy, a grocer, and (almost) a bank. Google is pushing into new markets by creating its Office Suite, designing a mobile phone, and rumor has it, designing a Google Operating System.
4 - Wal-Mart continues to seek approval to operate as a commercial bank. Google is in a well publicized hunt for wireless spectrum being auctioned by the government.

The main theme here is that both Google and Wal-Mart are titans of their industries who can use their size to rely on profits from one part of their business to disrupt other sectors with low cost alternatives. If the rumor of the “Free Google Phone” being ad-supported is at all true then we would have the perfect example. Ok, that almost certainly isn’t true, but a rumored price point of $100 seems more likely, and would still undercut the G-phone’s perceived competition, the iPhone. Google’s ability to make money without ever charging consumers is staggering, and is something that Microsoft, Yahoo, and soon Verizon will have to appreciate and adjust for.

So if I’m right, and Google is the “Wal-Mart of the Web,” is that good or bad? For consumers, it’s both. It’s been great getting effective search, a cool email account, and a free online word processor. But just like the cheap plastic crap at Wal-Mart, there are costs to society. In this case, Google’s effective ads have undercut the ability of newspapers to sell advertising, and pose a legitimate threat to the future of professional reporting. Free everything also means ads everywhere, including in my email, and maybe soon in my Google Docs, or someday, on my Google Cell Phone. As with Wal-Mart, getting cheap products is a mixed blessing for consumers.

However, for Google’s competition, as with Wal-Mart’s, the message is not mixed at all - Be On Your Toes.