When I went to work for the General Electric Computer Department as a young naïve Ph.D. in 1961, I quickly learned that IBM was invincible. One day I discovered that each year IBM spent more on R and D than GE's total sales of computer equipment. When I went to work for Intel, I remember Bob Noyce, the inventor of the integrated circuit and one of the founders of Intel, telling me that one day Intel would provide computers, microprocessors, to IBM and that Intel would become the standard industry architecture. I dismissed the idea because I know that Bob did not understand the computer business. Of course IBM still exists today as a vibrant company but the old IBM only exists in a severely atrophied form.
Just a few years ago, AOL, Yahoo, and eBay were dominant and appeared to be invincible. But in the Internet world things happen at light speed. The dominance of these companies has been broken. Their businesses have gone from vibrant to dull.
So how does all of this apply to Google? Could they possibly have an Achilles Heel? I think the answer is yes. They might be vulnerable to an attack by a new technology that would make search in its current form irrelevant.
But I have a different concern.
When I ran sales and marketing at Intel, I used to teach marketing classes to aspiring sales and marketing employees. One of the topics I discussed was pricing. I used to explain to them that we should price our products based on the value to the customer. When our products were new and unique the value of those products was determined by the opportunities they created for our customers. I would then explain that once those products matured, others would copy them or offer different products that could perform similar functions. At that point the value of Intel's products would be determined by what others charged for their products. If enough alternatives existed in the market then those products would be sold based on their cost to manufacture and if enough capacity and alternatives existed, the price would get uncomfortably close to the manufacturing cost. When that happened in the words of Gordon Moore, another Intel founder, Intel's golden geese would turn to lead ducks.
So here is the challenge Google faces.
The Internet appears to be infinite in size. It has infinite capacity. It used to exist only on devices attached to mainframe computers. Then along came the PC and it will soon reach billions of people on tablets and smart phones. As the Internet has grown so has the number of services—blogs, social networks, shopping sites, games, material to read, etc as well as the number of places to advertise.