Bala Iyer

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Google and de-layering

Posted by Bala Iyer on Mon, Aug 29, 2005 @ 01:21 PM

With Google desktop, Google has the potential to create a new platform and displace the incumbent's (MSFT) hold on the OS layer. Although this is a play from the Netscape playbook, there are clear differences. Netscape's ambition was to provide an application toolkit that would encourage software vendors to write to their browser platform and thereby render the underlying OS to a commodity status. As is well documented, this strategy did not work when MSFT "cut off their air supply."

What is different with Google's case is that it doesn't just provide a toolkit. Google has content (8 billion indexed pages, data on consumer behavior), and applications for search to go along with the toolkit. The recent launch of the Desktop application allows Google to integrate all their services. This application provides users with access to information residing within and outside the PC. As a result, consumers would get accustomed to seeing this application as the start page on their computer. In addition to this, with developers creating more "mash-up" applications that work with Google applications, Google has a better chance to establish a layer between the applications and OS platform. Once this layer is established, they can choose to work on any OS platform. .

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Google could be delicious

Posted by Bala Iyer on Tue, Aug 16, 2005 @ 09:58 AM

As far as I can tell, Google uses information within a web page and the links to the page containing the text to determine a page's relevance. I recently opened an account with del.icio.us mainly to bookmark my Google links and access it from any computer (home, work or elsewhere). For each link, del.icio.us asks for a description and tags. Once we submit our tags, we can see who else has tagged those very same pages. Users can then navigate to that persons page and see other pages that they have tagged. Using this feature, I was able to access many Goolge related sites. This experience reminded me of Amazon.com recommendations. Amazon makes recommendations by analyzing customer transaction records and deriving similarities. Google should add this feature and recommend pages based on user queries. The main question for Google is -- will imperfect social tags do better than their page ranking algorithm? Should they use a hybrid approach? Is social tagging next for Google? .

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Multi-sided platforms and architectural control

Posted by Bala Iyer on Fri, Aug 12, 2005 @ 07:45 AM

A multi-sided platform must serve two or more groups of customers. For example, credit card companies serve both shoppers and merchants or shopping malls that bring together shoppers and merchants. Another necessary condition is that these customer groups must benefit from the mediating platform (create network effects). For example, if more retailers decide to carry a particular credit card, the more benefits to the customer carrying the credit card. By using the platform, all parties must derive a clear and tangible benefit. For example, they create value through efficiency gains and creation of options that provide flexibility to deal with evolving uncertainty. A final condition that we have identified is the creation of control points. Control points are the set of components within the platform that are vital to the creation and appropriation of value. They are also very influential in the performance of application that run on top of the platform.

In Google's case, their customers use the search engine for many reasons. One obvious reason is the simple and easy to use interface with very little clutter. Another reason is Google's superior search algorithms that find relevant results. The vast repository of indexed pages is also very attractive to customers. Another group that Google serves well is the set of firms providing complementary services. Google provides them with easy access to their services and that they can use to build applications that work on top of Google's platform. These firms constitute the developer community that is vital to Google's success. As more developers use Google's facilities to launch applications, consumers find more value in using Google's search engine. Google's services are also used by firms to build their brand and advertise on the Internet. These firms use products that are provided by Google or by a third party developer to sell their wares to customers who use Google as their search engine. All of them derive tangible benefits. Customers find relevant search results and ads. Developers launching applications productively by reusing and extending Google's services. Firms using AdSense for serving up ads can also use its reporting facilities to track effectiveness of campaigns. Since all applications have to call Google's search engine, using public APIs that have to be invoked every time, to get relevant results, Google controls how much and how many times any given user can call its APIs. This gives it architectural control over its ecosystem partners. .

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Google the design architect

Posted by Bala Iyer on Thu, Aug 11, 2005 @ 09:44 AM

In their classic work on the role of modularity in the design of complex systems, Baldwin and Clark identify three benefits derived from modularization. First of all, modularity makes complexity manageable. They allow designers to work in parallel on different parts of the system. Finally, modularity accommodates uncertainty. Computer industry has shown modular development over the years. This has allowed firms to specialize in particular areas or stacks, while depending on other firms to supply other parts of the total system. The reward awaiting participants in the modular design is compatibility and interoperability. This reward is ensured by the presence of design rules that govern the architecture, interfaces and tests of the system. This brings us to Google. First of all, Google has created a separate identity for search. Given that there is lot of uncertainty around what comprises search and how it should be delivered, Google, the design architect, has created a separate industry module. Within search, Google has defined the components, the interfaces and the test to determine conformity. By becoming the de facto platform, Google has creates the design rules for the search platform. As a result, Google has created a lot of value within the industry. However, all the design rules and interfaces are open for all to view. Given this, how does Google appropriate value? .

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Will Google finally launch WEB SERVICES

Posted by Bala Iyer on Wed, Aug 10, 2005 @ 06:41 AM

With its current set of applications, Google has provided a platform for a network of players to develop and launch search related services. This is made possible as a result of Google’s applications being developed as modules with public APIs that can be called by third party service providers. A major benefit in developing such modular components with standard interfaces is what is known as combinatorial innovation. The idea is that every now and then a set of standardized parts or components comes along, triggering a wave of experimentation by innovators who tinker with the many combinations of these components. The result: a wealth of new products built on the newly available components. Some of these products are novel even to the designer of the component!

This is the same idea on which webservices arrived. However, due to a lack of standardization, it has not really taken off. Google is establishing these standards through natural experiments that are taking place right now. Through these experiments, Google may have invented the process and protocol to be followed for creating and listing web services. Although, in its current state, Google is experimenting exclusively with search related services, there is nothing to prevent it from providing a forum to launch other types of applications.

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The Long Tail Market

Posted by Bala Iyer on Mon, Aug 08, 2005 @ 09:48 AM

In an era driven by the logic of serving the common demand across the market, the long tail idea is very appealing. At Google's first shareholder's meeting in May 2005, Eric Schmidt, Google’s CEO, describes Google's mission as "serving the long tail." The Long Tail, as described by Chris Anderson, editor-in-chief at Wired, is a classic byproduct of Internet based business. In that article, he provides examples of how information technology turns mass markets into a million niches. One interesting example is video rental. The average Netflix customer rents seven DVDs a month, three times the rate at brick-and-mortar stores. This he says is due to two reasons. First, when the incremental costs of making everything available to anyone are low enough, companies can offer massive variety instead of just pushing the latest blockbuster. Second, using the improved signal-to-noise ratio that comes from following a good recommendation encourages exploration and can reawaken a passion for music and film, potentially creating a far larger entertainment market overall.

Google, too, is a good example of a company catering to the long tail. At one end, they have large firms such as Wal-Mart. At the other end, they have individual users. In the middle are the mid-sized businesses that Google prides itself in serving well. To serve large businesses, Google brought out a whole suite of tools (AdSense and AdWords) for very large advertisers who can use their services in all of their divisions to generate lots of revenues. For the individual users, it is almost a daily release cycle with new products (albeit beta versions) cropping up one every other day. The insight from the long tail concept is that there are enough customers with niche needs that can be profitably served by a company using its leverage with the large customers.

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Google's business model puzzle

Posted by Bala Iyer on Fri, Aug 05, 2005 @ 04:08 PM

Google plays in what is called multi-sided markets. They have to provide search services that are appreciated by end customers searching for information. At the same time, they should provide advertisers with the ability to present relevant information to the searching consumers. Advertisers should be supported as they provide information for customers coming to Google's website or even to other website properties (Google does this using the AdWords and AdSense platform). Another constituent they should consider is the developers who provides services that work on top of Google's services. For example, Prudential has a service to show listed properties in the Chicago area and they present property information using Google Earth. Currently, Google provides API-based access to all these constituents.

Google also benefits from what are called network effects. As a result, as more people use Google for searches, more advertisers come to it. More advertisers create more relevant sponsored links and this results in greater revenues for Google and this revenue gets invested in better search engine technology and better search engine results in more advertisers and so on. Here is the puzzle: should Google charge every one (other than end-users) per API call or should they simply charge the advertisers a transaction fee for any ad served to the end-user? 

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70/20/10 rule

Posted by Bala Iyer on Fri, Aug 05, 2005 @ 09:52 AM

What is the right balance between exploiting what you know and exploring new areas? Either extreme could turn out to be bad for companies. On one hand, companies should be able to get the best out of their current business line, while ensuring that they are not blindsided by the next big thing in their industry. Google's CEO has instituted the 70/20/10 rule within his company. This means that seventy percent of the company's money is invested in areas relating to its core business of advertising and search, 20 percent in related but secondary businesses (news, desktop search, Gmail), and 10 percent for comparatively wild, new ideas (Orkut, Keyhole, Picasa). Google employees have 20% time – almost one day a week – in which they are free to pursue projects that are passionate about and think will benefit Google. This policy has resulted in Google News, Google Suggest, and Orkut. Should this strategy be in every company's playbook? .

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Form factor

Posted by Bala Iyer on Thu, Aug 04, 2005 @ 09:57 AM

Given that competition is about delivering the right information using contextual information, the next interesting question is about the device on which it is delivered. Is PC the right platform? Google already has an alliance with T-Mobile that provides consumers with the Google search engine on the homepage of the new "web 'n' walk" Internet service for cell phones. What about handheld devices like PDAs? Will they become extinct? If competitors are staking out territory in the smart phone market, who will emerge as the platform providers? Large amounts are at stake for players in the ecosystem such as device makers, operating system vendors, application provider and operators (Verizon, Cingular, Vodafone, etc.). .

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Strategic questions for Google

Posted by Bala Iyer on Wed, Aug 03, 2005 @ 11:27 AM

What products should Google introduce into the enterprise market? Should they focus on any vertical markets? What are some potential applications of software as a service that can run on top of Google’s desktop search platform? While all their products create a great deal of value, how does Google appropriate value?  Should Google open its proprietary APIs to establish a standard? Should they charge for API use and for how long? Who should Google partner with? What metrics should Google track closely?

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Posted by Bala Iyer on Wed, Aug 03, 2005 @ 11:21 AM

Why is a search engine company creating so much commotion in the marketplace? Is Google doing something that important? Google's mission statement reveals why it is perceived to be a big threat to Microsoft. Its mission statement reads "to organize the world's information and make it universally accessible and useful ." It doesn't get more elementary than that. This could be the stated goal for any packaged software company. Google is beginning to roll out applications as services. Currently, it has exposed APIs to Google Earth and AdWords. Soon they could begin to provide enterprise applications to manage information within healthcare, financial services or legal sectors. By creating development toolkits and standards, Google has begun to attract developers to write to the Google platform. On top of this, they have established themselves on the privacy and personalization front. This makes them a very credible threat! .

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