Google’s entire revenue is generated from one source, namely online ads. Google maintains its predominant position in the online advertising market based on the promise of the wide range of platforms and reach these platforms have. It promises to deliver ads in people’s inbox, social networking site, third party sites apart from search engines. The key to dominating this market is scale and size. But this also has significant risks, as the entire business model of Google is built on this one source of revenue.
In an attempt to de-risk its business, Google launched Google Video, an online video rental store. Recently, Google decided to close down this business. Wilson Ng writes on Google’s recent failure:
When your company becomes successful, ( or even before), there will always be a pressure to diversify - introduce new models, products, and services. No matter how good you are, you will succeed or fail.
How you respond, and work when the product is not as good, which also hits your other brands, will be as crucial to your company’s continued success.(Link)
And over at the Fool:
Google's once-ambitious plan to sell and rent videos through Google Video, a cornerstone of the monetization plan when it launched Google Video last year, is coming to an end.
In a letter sent to previous Google Video shoppers, the world's leading search engine announced that it would stop supporting its platform that gave indie and major studios a digital outlet to sell movies, documentaries, short films, and television shows. (link)
Google should look to de-risk its business and diversify its income if it is to remain successful. It primarily remains a search driven company, unlike Yahoo which is content driven (Yahoo business, News etc) apart from being search driven. Google's inability to diversify raises the question is it just a online advertising firm?
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