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Does Google Need to Change Its Business Plan?

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At its very core, Google (NASDAQ: GOOGL  ) is a search company. It has built several auxiliary businesses that are focused on augmenting the company's position in search, but all roads lead back to the search engine that has changed the way we communicate: To answer any question, "just Google it." Android may command a nearly 70% global smartphone market share, but the premise of Android is to drive Google's search business. The same can be said for Google's tablets, its cloud-based software applications, and every other pond in which the company plays.

The problem -- if you want to call it a problem yet -- is that the company is under attack from so many different angles that it may need to stop giving away so much good stuff in an effort to drive search. Android is the easiest place to see this phenomenon, as the company is seeing pressure from multiple directions pop up. The release of Facebook (NASDAQ: FB  ) Home has the potential to change the user experience of smartphones in general, but also to guide business from Google to Facebook. In addition, a new operating system originating in a collaboration among Samsung, Intel (NASDAQ: INTC  ) , and others will hit Android from another angle.

The Facebook Home problem
When Facebook Home was announced, CEO Mark Zuckerberg extolled the benefits of Android, explaining that without the totally open nature of the OS, Facebook would never have been able to release the new meta app. FB Home resides in the space between the OS and other apps, taking over, among other things, the home screen and lock screen. The user experience is completely transformed into a Facebook-driven one, but this has serious ramifications for Google.

Source: Facebook.

While Facebook Home doesn't currently include ads, with the real estate on the lock screen and home screen under the company's control, it is easy to see where they could be added. This has the potential to undermine Google's efforts in mobile advertising, but the issue runs deeper. As Facebook begins to dabble with its own search capabilities, by residing above the Android OS, it may have the power to disrupt users from turning to Google for their search needs. That is a problem.

Here comes Tizen
Near the end of the summer, Samsung is expected to roll out its first premium smartphone based on the new Tizen OS -- the native OS being developed with the help of Intel and several other Asian telecoms. Tizen is a reaction to the lack of popularity and functionality that Google commands in the Far East. Ever since the company pulled out of China, most wireless providers have opted to use Android but have cobbled together user interfaces that work in spite of Android, not in conjunction with it. Tizen is expected to improve the user experience and offer new functionality that Asian carriers can enhance, but it has the potential to deal Google a significant blow.

If it ain't broke ...
It is hard to imagine that Google would seriously alter the approach that has made it the veritable King of Tech, but the challengers aren't going to accept defeat and go away. The search-business plan has served Google extremely well and is deeply ingrained in its culture. Still, CEO Larry Page has made his focus on social media known to his employees and the world, and it should not be overlooked. This summer promises to be eventful as new challenges surface, and investors are well advised to remain vigilant.

Google is a great company, but once you're at the top, staying there is hard.

As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other Web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.

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  • Report this Comment On April 22, 2013, at 2:32 PM, prginww wrote:

    Interesting article on Google! In the IM Social site this post has been "kingged" and the comment below was left:

    The only cause for alarm would be when any innovation that would be introduced in the summer begins to affect the earnings of the search engine.

    I still see Google coming out stronger in the social media business because it has built a solid search system for itself. This is not to undermine the threats posed by challengers.

    Conclusively, investors should really be vigilante so they know where to really put their money as the battle for king of the Internet rages!

    Sunday - contributor

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