Is Google mad?

No-one can accuse Google of resting on its laurels. But having sought to shape-shift the social universe with Google+, what to make of the decision to acquire Motorola? Are patents the latest tech bubble? This post on Business Insider certainly raises some doubts about the prudence of Google’s decision, saying basically that unless they’re in it to strip the intellectual goodness of the patents and run, this is a Time Warner-AOL re-run in the making.

The key concerns are:

The discrepancy in margins and profit ceilings between the two companies, with Google in a league of its own in online advertising and Motorola an also-ran in the low-margin frenzy of hardware manufacture. The common descriptor of “technology” is not enough to hold together two companies that are so disparate in their outlooks, priorities, philosophies and outputs.

Motorola will distract resources, time and attention. Without that, Motorola’s returns will quickly drag on the Google balance sheet.

And my own question – How does much of the rest of the mobile world which uses Android react to such a move? Isn’t there a real risk of cannibalisation here?

All of these points speak to a lingering disquiet on my part, which echoes the “diversification” strategies of the late 80s. Back then, the way to make money, common wisdom declared, was to broaden your revenue streams and/or asset strip and hock off the parts. All sorts of businesses poked their noses into sectors that were quite literally none of their business – often with disastrous results. My concern is that the “war of the worlds” will send tech companies down a similar route – delving into areas of the sector that they are not equipped, physically or psychologically, to maximise in the bid to land-grab whatever seems valuable.

If that happens, expect wreckage. Because one brand’s assets can rapidly become another brand’s liabilities if the set-ups and systems are calibrated incorrectly. Marrying a high-touch, high margin business with a low-touch, low margin business looks like a conflict of interests waiting to happen.

The question for Google is: do you really know what you’re looking for in this, and, ironically, will you find it?


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