Will This Internet Company Succeed Offline?
Steven is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Great companies know where to focus. They know their strengths and how to leverage their best qualities. If they succeed, shareholders reap the benefits over the long-term. When a company reaches a certain market saturation, new directions become integral to future success. For an Internet company, it means making the jump beyond cyberspace and establishing a presence in the bricks-and-mortar world.
Google (NASDAQ: GOOG) is no stranger to such strategies. After many attempted make-it-in-the-real-worlds, it’s obvious they are trying to make the jump. But it hasn’t been so easy for them. They believed that because they are as ubiquitous as the Internet, it would guarantee real-world success. The truth is they’ve had more failures than success so far. Today we’re going to examine Google’s track record offline and what can be done to improve their delivery.
Probably Should’ve Googled it.
The company that has taken on organizing the world’s information lacks insight about how to operate offline. This is the same company that has access to the countless volumes of successful real-world business strategies. They didn’t do their homework and it shows. Below we’ll sort through some recent offline failures of Google.
Google Fiber
Imagine an Internet that’s one hundred times faster than current neighborhood broadband speeds. Now imagine it for $70 per month. Sound promising?
The project will first focus in the Kansas City market and each neighborhood requires enough pre-registrants for construction to commence. It turns out, not all the proposed neighborhoods in Kansas City were as interested as Google thought. Many zip codes where Google Fiber sought to be available were located in lower income areas. As Google learned, these areas do not regard higher-speed Internet as a top priority. This resulted in a failure rate of over 10% for the project.
In cyberspace, it’s easy for Google to launch a new product or service and see mass adoption because they’re usually free. The real-world is a different story because things cost money. A simple demographic study of where they should focus this initiative would have saved the marketing embarrassment.
Chromebooks
A Google-inspired laptop is something I’d certainly get behind, provided the price versus the experience is right. Unfortunately, that’s not the case. It’s underpowered for the price and they aren’t easy to find. Vendors aren’t pushing the simplified computing experience and Google isn’t advertising them. On top of it all, there are serious concerns about compatibility. At this stage, why would consumers want to know about them?
Until they get the word out, offer improved compatibility, and change the price-to-performance ratio, Chromebooks aren’t going to be wildly successful with consumers. The sluggish performance of Chromebooks amongst consumers suggests that Google didn’t study its audience.
Nexus Q
Nexus Q is a “social streaming” media player. Take out “social streaming” and you’re left with a $300 Android-only, cloud-based media player with a novelty feature. Were they really serious with this one? It costs three times more than an Apple TV and offers less functionality. With the Apple TV, you have access to your local library. With the Nexus Q, everything has to be stored in the cloud, including your local library. In other words, the Q isn’t easy to integrate into already established libraries.
Between the three examples, I think you can start seeing the trend.
A Glimmer of Hope
It’s not all negative for Google’s offline endeavors. The Nexus 7 tablet is a good example of proper execution. For $200 you can get one the best bang-for-your-buck tablets. They researched the landscape and delivered an excellent tablet for the money. And people know about it because they advertised, raising the brand awareness. As a result, Google is averaging 70,000 activations per day and is on pace for a 6.3 million quarter. Considering other offline failures, this is a victory for Google. They’ve developed a homegrown tablet and managed to deliver a successful marketing campaign.
Partnering For Results
Establishing key partnerships in markets where a business seeks to expand may improve the odds of success. These relationships provide invaluable insight from firsthand experience. It can be the different from being good, to being excellent.
In an effort to expand offline acceptance of PayPal, eBay (NASDAQ: EBAY) has befriended key partners in the markets they seek to dominate. When eBay thought about how they wanted PayPal to be used, they made partnerships with both VeriFone (NYSE: PAY) and Discover (NYSE: DFS). VeriFone’s checkout terminals are installed at over 70% of the top 200 US retailers, and Discover opened PayPal up to over 7 million more. Between the two, they’ve quickly covered their bases.
Fully knowing they are competing with Google Wallet, they opted to differentiate themselves. The key difference is that PayPal’s digital wallet experience doesn’t require merchants to install a new checkout terminal. Taking on the right partners has given them this lead, making them the king of digital wallets.
Google is no stranger to this approach, with Android being the pinnacle example. Partnering with OEMS has made Android OS the world’s most used smartphone operating system. It’s safe to say 1.3 million Android activations per day speak volumes about the power of partnership.
If You Build it, They Will Come
The online approach for Google doesn’t work so well offline, because proactive marketing is not their strong suit. It helps explain why Google has seen its fair share of failures in the real-world. It's wrong to think about Google as a marketing company. Instead, they provide a platform for marketers to target a relevant audience. Being a marketer themselves is a different distinction. Sticking to this strength is their best use of resources. Where they lack resources, they should partner for results, and do more research. In the end, if Google wants to continue operating independently in the real-world, they have to improve their marketing skills.
TopDownTrends has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and VeriFone Holdings. Motley Fool newsletter services recommend Apple, eBay, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
