"Should innovation-minded managers look at the fast-growing Internet company as a model — or an anomaly?" This is the question posed by Nick G Carr in a Strategy & Business article. Delving into various aspects of the enigmatic company, he opines:
The way Google makes money is actually straightforward: It brokers and publishes advertisements through digital media. ... snip ... Google’s protean appearance is not a reflection of its core business. Rather, it stems from the vast number of complements to its core business. ... snip ... For Google, literally everything that happens on the Internet is a complement to its main business. The more things that people and companies do online, the more ads they see and the more money Google makes. In addition, as Internet activity increases, Google collects more data on consumers’ needs and behavior and can tailor its ads more precisely, strengthening its competitive advantage and further increasing its income. As more and more products and services are delivered digitally over computer networks - entertainment, news, software programs, financial transactions - Google’s range of complements is expanding into ever more industry sectors.
Though this argument appears plausible, I don't think it will withstand critical scrutiny. Not all online activities can be equally monetized through ads. It is well documented that ads alongside search results perform much better than ads on content pages, email messages, online productivity apps, video clips or social networks (to be fair the verdict on last two is still not out). Would a company as focussed on effectiveness as Google try to increase the online ad market by doing things which are proven not to be very effective?
In my opinion, Google's core competency is in developing and running highly customized hardware and software systems and they will use this competency to solve mega-problems that others are ill-equipped to address. In the process, they will disrupt a number of established businesses.