The Soul of Google

I came across a nice line from Cringely the other day:

No president could spend money like Ronald Reagan could spend money. His greatest legacy, in fact, was spending so much on defense projects like his "Star Wars" anti-missile system that the USSR was torn apart economically by simply trying to compete, thus ending the Cold War.

Reagan could have worked at Google.

Certainly in light of Microsoft's purchase of aQuantive, that comparison seems pretty apt.  Microsoft has a lot of cash, but if it has to keep making deals like that in order to stay on par with Google, then the company is in trouble -- sort of like the Soviet Union.

Google on the other hand has acquisition insurance, as it knows that anytime it makes a purchase, it's competitors will respond with the purchase of a weaker, but more expensive rival.  That might be a bit of a generalization, but it's interesting to see how aggressive a company Google is.  There is a key difference between Google's aggression today and Microsoft's aggression during its Halcyon days.  Google is all about its cash.  It wants to acquire it and use it.  Early on, Google hinted that this would be its strategy when it announced a secondary stock offering follow-on offering back in August '05, taking advantage of its soaring stock to net itself a cool $4 billion.  Since then, the company's shown a willingness to part with its cash for premium properties, like YouTube.

Microsoft never showed a willingness to let go of its hard-earned cash.  Only recently has it really started buying small firms.  In a way, it's aggression was much meaner than Google's, because instead of buying out upstarts, it just under-priced them and killed them.  This might explain why Google doesn't seem to inspire the same animosity that Microsoft always did.  There's the perception that the company would rather shower startups with its cash as opposed to pushing them out of the market.  Google is a VCs friend, not a VCs worst nightmare.

Meanwhile, as long as Google continues to grow as fast as it does, it will be able to get away with an aggressive acquisition strategy.  But as things slow and investors start paying more attention, simply doling out huge gobs of cash (or stock) will prompt much more scrutiny.

Comments

[KipEsquire]

You mean a follow-on offering (in which a company sells new shares), not a secondary offering (in which large shareholders re-sell existing shares through an underwriter).

It's hard to take someone seriously who doesn't know the basic terminology of their subject matter (and supposed past occupation).

[Anil Philip]

Google's Achilles heel is web advertising. It is much weaker than M$. IMHO, I predict that web advertising will be web 2.0's bubble. (Not saying more until I check out my theory on why it may prove to be a bubble).

[Professah Funkensteen]

And it's hard not to think somebody's a douchebag when they go by "KipEsquire" and leave asshole comments on blogs.