Since September I've been saying on KenRadio.com that Google is in for a very rough Q1 in 2009. One doesn't need to be a genius to know that in this economy, advertising will be down, and given that Q1 is always a slow quarter anyway, the outlook for Google to slow down was obvious (or should have been.)
So what has Google done to keep the numbers looking good? They're cutting expenses and dropping projects, including some rather high profile ones like Google Video, Dodgeball and Joiku amongst others. Apparently they don't have the strategic fit to be part of the Google going forward strategy. Give Google credit for realizing it now, and cutting them at a time where the seas are about to get rougher.
This all though has a familiar ring. It's the ring of AOL.
AOL went on an acquisition tear in the late 90s and early 2000s. That was when the fear factor of "if we don't buy it Yahoo will" or "Microsoft will" was rampant. Other companies played in the game too, like Interactive Corporation (IAC) and a few more. But where AOL failed was in their inability to really integrate what they bought, something Yahoo never really suffered from. If you look at a lot of what Yahoo acquired, it was either Microsoft platform based, a bunch of HTML code with lots of eyeballs looking at it, or lists of members who could be easily transformed into Yahoo users. IAC dabbled at integration, but in the end only chose to keep the customer data set as a shared base, while letting each property stand on its own.
On the other hand AOL bought disparate parts, tried to put them onto their RainMan based platform while at the same time trying to go to a Web based platform for the purpose of ad revenue. As a matter of fact, about the only acquisitions AOL really has ended up doing anything well with has been related to advertising serving. The rest just sort of hangs around or has been jettisoned off already.
So this brings us back to Google...and why they are looking like AOL to me. And more importantly what they realized sooner than AOL did.
Google has come to the honest realization that they can't integrate everything they bought fast enough. Jaiku is the best example. While Google fiddled, Twitter danced and became the micro-blogging standard. Yammer is fast on its way to become the corporate Twitter and may be the "Blackberry" of all 2.0 apps to date. It has that same kind of feel to me, and I've been a RIM user since 1998 or so.
Had Google blended Jaiku into their APPs platform from the start, done more with their anemic blogger service, Blogger, the world was before them to own with Jaiku. Instead they bought the brains of the company, but cast off something very good. This is just like what AOL did with Shoutcast and Winamp, as well as to Justin Frankel. The team on the buying side didn't know what to do with what they had bought or how to manage who they just acquired. Call that integration issues.
If Google is tightening the belts, its a good thing they are being so public about it now. As a matter of fact, it looks like they don't want to be the next AOL, and actually by taking these steps now, they likely won't be.
But what this also tells me is that this all points to where Google is managing to the stock price, and to what matters to what's left of Wall Street. Earnings. To make their numbers Google has been steadily whittling away at their contracted workers, recruiters and now cutting lose their adopted young.
Google may spin their way through things when it comes time of earnings announcements, using profit percentages vs. total revenue as their measuring stick to make the earnings sound good, but if one would be taking the contrarian view it sure sounds like they are saying in somewhat veiled terms that the rough ride is there too and without these kinds of corrective actions that are painful now, Google would not be in a better place in a year than they are now.