A VC: The Starbucks of the Internet

The Starbucks of the Internet

There's a guy named Matt who reads my blog regularly and lives on the other side of Washington Square Park from me. We've never met, but we've exchanged a bunch of emails lately.

Today, we were having an email conversation about Google and he said that they'd become the "Starbucks of the Internet". I replied "How So?" He replied:

...just that they're on every corner. It's like the quote from the
movie Best in Show: "We met at Starbucks. Not the same one. They
were kitty corner from one another. We just noticed each other from
across the street." ;-)

Later on in the day, I was talking to my friend Mark and he called Google "The McDonalds of Internet Advertising - Billions Served".

When two people who've never met express similar ideas in the same afternoon, I generally take notice.

And it really crystalized what I had been thinking and trying to write about for the past couple days. I spent a half hour on the train down to Baltimore this morning trying to write a post about Google and didn't like what I wrote. Mark and Matt helped me articulate what I too had been feeling lately.

I think Google has become so mainstream and so ubiquitous in our everday Internet lives that its lost its mojo in some ways. That doesn't mean it won't continue to be hugely relevant, hugely profitable, and hugely important. But it does mean that there's a vacuum that can get filled by others who are small, innovative, new, and exciting.

My partner Brad used to go to Starbucks twice a day every day. Once in the morning on the way to work and once after lunch. It was his routine no matter where we were. Recently a new coffee shop opened near our office called Joe. They also have a store in the village.

Joe is twice as far from our office as the nearest Starbucks. It doesn't have wifi. It doesn't sell music. It doesn't have four stores in walking distance from our office. But Brad visits Joe twice a day and hasn't been going to Starbucks at all recently. Because Joe makes a damn good cup of coffee.

If you invest in the Internet, you must watch Google and understand them. And so I do that a fair amount.

What I see today is a big company (yes, they are big now) trying to extend its reach beyond search and into every nook and cranny of opportunity on the Internet. And without a lot of rhyme or reason.

Google has recently launched some very attractive web services like Google Local and Google Maps. Their SMS service is a killer app for cell phones. It seems like they are launching a new web service every week. It's so fast and furious that it is making my head spin.

But I don't understand how all of these new web services have anything to do with their core business of targeting advertising via search and contextual advertising. Do these services create more inventory for them to sell? Do they generate more data that allows Google to increase the relevance of the advertising? In some cases, like Local and Maps, I see the logic. In many other cases, it just seems like a laboratory turning out cool stuff and seeing what sticks.

And while they crank out more and more new stuff, their two core products, Search and Adsense, seem to be suffering from a lack of innovation.

Adsense doesn't perform very well for publishers. So much so that many publishers are turning back to banners. And Google is also turning to banners. It's back to the future. That's not innovation.

Google could acknowledge the limitations of its current contextual ad system and improve it. Or they could invest in new targeting systems like behavioral and beyond. But they are turning to serving bannners like Doubleclick did almost ten years ago. Why? I don't know.

And what about search? Has Google improved its search product recently? Not from what I can tell. I still get a tremendous amount of noise in the results. It's still better than Yahoo!, but not by much.

And finally, Google is acting like AOL all of a sudden. You can't do a deal with them without paying respect to their market position. That's fine and is always the case with a market leader, but it will come back to bite them because the deals they won't do will get done with others. And some of those deals are going to be important ones that will create new participants in the market who will grow and become more powerful over time.

Then there is the issue of caching the Intneret with the Accelerator. That is not web friendly behavior. It's another AOL move. It's a walled garden approach to the Internet. Google is supposed to be the most net saavy company going. If so, why would they do something like that?

Some people are going to read this post and think that I am trashing Google. I am not. Google has an enormous franchise and is better positioned than any Internet company I can think of.

But size is the enemy of efficiency and innovation. And Google has become a very big company very quickly. They are in Starbucks and McDonalds company now. That's great for them but its also great news for the little guy like Joe who can make a better cup of coffee or a better web service.

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The Starbucks of the Internet

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