Competing with Google – it can be done

Google Logo      youtube-logo.gif 

There has been a post about competing with Google at the back of my mind for some time and now they have agreed to buy YouTube for $1.65bn it has come to the top of the list.  This has been covered extensively so I won’t do that here.  For a VC perspective check out Fred Wilson’s post from yesterday and for a detailed news piece check out ZDNet.

I posted a couple of weeks ago that MySpace video had passed YouTube – with Yahoo! also in the top three Google had been left in a trailing position in the (potentially) exciting video market.

Assuming this deal goes through Google’s response has been to pay top dollar for the last independent company of scale in this space.

The message for entrepreneurs here is that competing with Google can be a very lucrative business.  Don’t get me wrong, Google is still a great company and if you are going to compete with them you had better be smart and pick your area well – but YouTube has shown it is possible to compete with Google and win.

I am writing this post because it seems to me that recently people have become too afraid of Google.  Google has been extremely successful with a couple of core products and has begun announcing their intention to dominate virtually all related markets (nothing new here – they are following in the footsteps of greats like Microsoft and Cisco before them).  But they have yet to repeat their success with Adwords and Adsense in any other markets.

I have been thinking about and talking about this subject a lot recently in connection with a couple of companies that we were looking at investing in.  Nearly everything I have heard gives anecdotal support to the view that outside of a few areas where they dominate it should be possible to successfully compete with Google.  The following is a selection of titbits that I have heard:

  • The culture hasn’t morphed from that of a start up to that of a $100bn+ company
  • Priorities seem to change regularly making them difficult to partner with
  • People on projects seem to change regularly making them difficult to partner with
  • Google is slow to respond and it is difficult to get them to do anything quickly

There was a lot like this and the dominant theme is that they don’t work very well with third parties.  That is not surprising given that their success has been all about attracting consumers to search via their site and using self service to cost effectively sign advertisers.  In many of the areas that are now emerging human to human contact and successful partnering will be critical to success.  For example, at YouTube they will need to cut deals with content owners to solve the copyright issues, in local search small businesses will need their hands holding, on social networks MySpace is showing that creative partnering with advertisers is the way forward.

I would not have a problem backing a business in an area where Google has announced their intention to compete provided that they were a) ahead of Google, and b) partnering or direct sales were an important part of the play.