The Critical 'I'

Read. React. Repeat.

Wednesday, April 28, 2004

Why did Google decide to offer free email? Because it's looking to diversify its potential revenue streams beyond the search business, and email is probably the best bet for attracting and retaining eyeballs, according to the latest comScore Media Metrix numbers.
In conclusion, Dan Hess, senior vice president of comScore Networks, said "E-mail is a critical and time-intensive application, capturing significant share of mind among consumers. (This sends) a signal that Google will compete across a broad range of applications traditionally offered by portals."
If the goal is to build a subscriber base of dedicated, active users, then email is the way to go. But I've said before that this move to emulate Yahoo! and other portals is, ultimately, folly:
I don't see how this does anything but pull Google's focus away from its core business of search. And of course, it's the same path that the former search engine kings like Yahoo! and Excite took at the turn of the century, when they tried to morph into "portals" that offered email and other features. I've maintained that Google owes its success, in large part, to the fact that the first wave of search engines ceded the search territory to Google, while they embarked on their fool's-gold quest of portalhood. Now Google is taking the same sort of steps. It feels like this is going to be a recurring theme in the Internet industry.
So I guess we can shift our focus to the now-small, soon-to-be-growing upstart search engines that will move onto Google's former search turf while the big G fritters away its resources on Gmail and the like.

The comScore numbers on Google's collection of sites are most interesting, and strongly point to another reason for embarking on the email route:

Google Sites, February 2004
Unique Visitors
Google Web Search55,198,000
Google Images14,232,000
Google Directory5,292,000
Google News3,129,000
Google Groups2,154,000
Google Sites61,217,000

Froogle is conspicuously puny, with less than half a million views. And this is after months of beta testing. Froogle was really Google's first venture in mass-market services beyond search, a somewhat indirect way to challenge Amazon and (especially) eBay in another lucrative online space, e-tailing. Based on these numbers, it appears to be a big flop. I'm thinking Google decided to push ahead with Gmail partly to make up for Froogle's failure to connect with Internet users.

If things aren't getting jittery at Google corporate, they must be at least a little concerned. With the IPO imminent, the company is suddenly experiencing some unaccustomed bumps in the road: A weak showing for Froogle, and criticism over the privacy concerns connected with Gmail. These two offerings aren't just side projects: They're expected to develop into significant revenue sources for Google. If they somehow flounder, it's not going to be promising for the company long-term. Maybe that's why they're finally taking the public-offering plunge now, while these setbacks are not as noticable (and indeed, while Gmail is still full of the promise of attracting a huge number of subscribers, despite the privacy issue). If they waited another year, these problems might multiply to the point where they can't be disregarded.