The longer Google takes to find its next big business amid an expected slowdown in its core ad business, the more ecosystem players are at risk, says Social Capital CEO Chamath Palihapitiya.
Speaking at The Phocuswright Conference this week, Palihapitiya said that while he "loves" Google and its stock as an investor, he warned that time is running out for companies who have become reliant on it.
"The longer it takes for Google to find a second act, the more you're f----d," he said about those companies, adding that investor patience will wane. "If you are in the business of being a parasite on top of Google, your medium-term and long-term prospects are terrible; you're an impaired company, you don't know it," he added. The only way to win, he argued, is to offer unique value; many companies have done the opposite, becoming more like their competitors and relying on Google to drive volume. That's a recipe for disaster.
"This is accurate," tweeted fellow venture capitalist Bill Gurley, of Benchmark, Thursday evening.
The comments come as Google's parent company, Alphabet, is preparing for a slowdown in its core digital advertising business. The company showed slowing ad revenue in its first quarter of 2019 and a decline in profit from the previous year in the third quarter.
Palihapitiya pointed to the travel industry, calling Google's travel efforts a "canary in a coal mine" and citing both Expedia and TripAdvisor. "At the core of it is the decision that they will capture the overwhelming majority of profit in the travel sector," he said about Google.
Altimeter Capital CEO Brad Gerstner, who was interviewing Palihapitiya, chimed in on the conversation.
"TripAdvisor, who is one of the biggest free riders in Google — free search — is now the one who's lost the most equity value as Google harvests free search into paid search."
Google did not immediately respond to a request for comment.
The exchange comes around the 6:30 mark in this video.
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