Saturday, January 07, 2006

Yahoo! and Google: Two Peas in an iPod?

Yesterday (Friday), Yahoo! and Google announced new products and services at their respective CES keynote presentations. Yahoo brought in Tom Cruise, while Google countered with Robin Williams. Yahoo’s announcements got much less coverage than Google’s, but what I find so interesting is that both companies essentially introduced the same things.

Yahoo announced:

  • Yahoo Go Mobile, which will enable mobile phones to access Yahoo’s most important services without using a web browser. (Yahoo’s first major hardware partner is Nokia.)

  • Yahoo Go TV,  which will extend the reach of Yahoo’s services to televisions connected to PC-based media centers (such as Windows Media Center and Intel Viiv-based PCs.)

  • Yahoo Go Desktop, which will enable consumers to access all their information through a suite of applications that run on their computers’ desktops. The first two components will be the Yahoo Widget Engine (formerly Konfabulator) and the Yahoo Go Desktop Dashboard, a “central control center” for accessing Yahoo applications without a browser.

Google announced:

  • Mobile Google,” where Motorola will install in selected new phones a Google icon that, when clicked, takes the user directly to Google for searches and other services.

  • Google Video on Viiv-Based PCs, which will enable users of computers built on Intel’s Viiv media platform to access Google services on their televisions and portable devices in the home.

  • Google Video Store, an online marketplace where content providers can sell, rent or give away their videos. Anyone can upload videos to the store. When customers buy or rent the videos, the content provider gets the revenue, less a transaction fee taken by Google.

  • Google Pack, a free downloadable suite of PC applications from Google and third-party developers, including all of Google’s desktop software applications and browser toolbars, Adobe’s Acrobat Reader 6, antivirus and antispyware software, RealNetworks’ media player and the Trillian instant messaging client.

In fact, about the only significant difference between the two sets of announcements is the Google Video Store, which is similar to Yahoo’s existing video search service.

So, are the two companies growing into clones of each other? Not really. Google’s strength is technology, an outgrowth of the experience and philosophy of Sergei Brin and Larry Page, the company’s two founders. Yahoo’s strength is media, exemplified by Chairman and CEO Terry Semel, who spent most of his career working for (and running) Warner Brothers’ motion picture business.

Google drew first blood with its automated Internet indexing system that enabled the company to provide search results from many times more websites and documents than Yahoo. When Terry Semel was hired by Yahoo, he quickly diversified his company’s services to put far more emphasis on (and resources into) aggregating media, as well as producing its own original media. To date, that’s been a very successful strategy, but now Google wants to do to Yahoo Media what it did to Yahoo Search.

I don’t think that Google is going to have much success in unseating Yahoo as the dominant media portal on the Internet. The reason is mindset rather than technology. Terry Semel and much of the management team he’s recruited (including Lloyd Braun, formerly President of ABC Television) come from the entertainment business. They know how the business works, the power players and the rules of success. Google, on the other hand, comes from technology. The company’s philosophy is to use technology to solve almost any problem.

Technology companies usually compete on the basis of who has the best technology (patent battles not withstanding,) while the entertainment business tends to adopt new technologies very slowly unless acted upon by an outside force (i.e., Sony, Toshiba, Napster, Apple, etc.). Encroach on its space too quickly, and you’re likely to get sued or legislated out of business.

Entertainment is one of the most intensely personal relationship-dependent businesses around. Yahoo moved its entire media operation to Santa Monica in order to be closer to the industry’s producers and distributors. I’d never count Google out, but the way that the entertainment business works will likely be anathema to Google’s management, as it already has been to Microsoft.

Google is likely to make a very nice business out of its new media ventures, but it’s unlikely to lead the pack. I’d put my bet on Yahoo for this one.
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