Playing Among Giants

Earlier today a friend asked what my thoughts were about starting a small online business during a recession. While I was thinking about it, I came up with a larger question, which is, why would anyone start an online business these days? With Google branching out more than ever, it's impossible to become involved in something that they aren't currently involved in or haven't thought of. In fact, a lot of Venture Capitalists commonly ask, "Well, what if Google decides to do 'X'?"

I think there are a lot of ways to answer that question, and the proper way to answer it obviously depends on the product in question. Google is a large company with almost a limitless reach to money and talent. Competing with them on any level is going to be difficult and will take a lot of hard work and money.

Obviously, Google's core product, search (and with it, search advertising) has allowed it to dominate the web. One thing Google has done wrong is expand past their core product offering. By necessity to survive, Google expanded from search (and advertising) to mobile, email, web analytics and more recently video and social networking. Because of this they have become a company that is a 'jack of all trades, master of one'.

So how do you compete with Google? The simple answer would be to find their weakness and exploit it (obviously this is oversimplifying it, but bear with me). In social networking, Orkut has never been big in the United States? Google was not first to market with social networking. It launched in 2004 well after known sites like Friendster and MySpace were dominating. Google knew it could provide a competitive product because of all the people already using Google Search on a daily basis, and all of the information they had access to. Regardless, Facebook launched after Orkut and clearly blew it away.

Another example is video. Google Video and YouTube launched roughly at the same time (for the sake of argument, YouTube may have launched a bit before Google Video). Video on the web was an instant success. With people beginning to have more access to broadband web speeds, the demand for video was growing. Not only that but the product that YouTube built was functionally better than Google Video. The end result was Google purchasing YouTube for $1.6 Billion.

So when one asks "Well, what if Google decides to do 'X'?", the way to answer that question is to say that Google has grown too big to properly develop and execute the strategy that is necessary in the development of the product. The next step in answering that question is to define why Google's product will never be as good as your product.