Did Google Kill Innovation?

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By Hugo Bernardo

- Here we go again. Another app with millions of users, another multi-billion dollar exit, another newly formed billionaires. Rinse, repeat, and you have Silicon Valley in essence.

Is this good? The debate is not new. Some say we’re in a bubble, which will not be so until it bursts. Some wonder why we’re funding Instagrams but not Hyperloops. And some complain about the new acqui-hire culture.

Diving into the blame game, I will go further back and blame Google for killing true innovation. Really?!? Google of all companies? Self-driving car, creepy futuristic glass, mystery-barge Google? Yes! That one.

Fake Innovation

If you’re a fan of the current state of affairs and young enough to have skipped the last tech bubble burst, your argument will go something like this.

Twitter > Facebook > Social Networks > Arab Spring > Win!

I’ve heard this argument so many times I was almost a believer! “Social networks can sound frivolous if you use them for cat memes and #foodporn, but they can be life-(history!)-changing when put in the right context” (e.g. popular uprising).

Here’s the problem with that argument. As we’ve seen with recent uprisings and popular movements (unfortunately there are so many around the world that I won’t be able to name them all, but think Brazil, Thailand, Syria, Ukraine, Venezuela), people use whatever is handy to pass the message – Facebook, Youtube, Blog, Email. Can you find a pattern across these media? It’s called the Internet, and World Wide Web, neither of them was funded by Silicon Valley.

Facebook, or Twitter (or…?) didn’t fundamentally change our behavior. We were already massively sharing stuff online, whether using the newest tool (ICQ, MSN Messenger, Friendster, Hi5, MySpace, Orkut) or the good “old” email. Facebook didn’t exist on 9/11/2001 but I heard about the attacks through IRC, and then email (being in Europe, news sites were not an option for most of the day and I didn’t have a TV).

The internet was innovation. The WWW was innovation. The goddamn email was innovation! All these tools dramatically changed our behavior. Facebook, Twitter (or Google) did not.

How Google Goggles changed how we perceive innovation

I remember the first day I saw google.com – I was finishing college and starting my first company. Google was cool but hardly life-changing. Search engines were not new, but Google was cleaner, and much better at its core task.

You might think Google and Adwords (those pesky colored adds around your search results) are one and the same thing, but Adwords did not exist in Google’s early days. The idea for Adwords came from Bill Gross (Idealab), “stolen” (and later paid for) by Google, to become one of the world’s biggest cash cows.

Why is this relevant? Because it fundamentally changed the way Silicon Valley looked at user value. Before Adwords, Google was a huge product with no revenue, similar to many companies that crashed and burned in the late 90s. Adwords, which was really an external product that Google acquired, made Google a powerhouse. And this happened through the biggest tech crash in history. Google single-handedly built the sequence:

Good product > Big user base > Biz model > Huge company > IPO

This sequence was used to build the biggest companies of the last decade in Silicon Valley. Google didn’t do it on purpose, of course, but since 2000 we have been looking at innovationand business building with Google Goggles, at least in the tech world.

Why is Google killing innovation?

If you know anything about statistics, you know that correlation does not imply causation, but that’s exactly what investors do all the time. Looking at IPO numbers from the last decade, it’s easy to say – if I want to build a successful business, I need to build a great product, and then attract millions of users. As an investor, I want to put money on the next Facebook (Twitter, Instagram, Whatsapp, Snapchat), which means that more likely than not, the next big company will be similar to Facebook.

Is it because it’s the only way to build a successful business, or is it because it’s the only way to get funding? Correlation vs Causation. Investors pick winners. If you need to build real innovation, most likely you need capital. If investors have their eyes set on the next user-building business, they will pass on capital-intensive companies. Eventually one of those user-building businesses will get big enough to either go public or get acquired, which will feed into the causation fallacy.

Google is awesome, and luckily (I think) it’s been using some of its massive revenue in life-changing ideas. But they destroyed true innovation. Think about it – How many Google X projects could get funding in Silicon Valley?

P.S. Someone asked me about debt and public markets as alternative financing sources. Debt is easy – unless you’re a big corporation or a billionaire, you won’t have collateral to back a truly innovative project. Public markets should be an alternative to VC, and you should blame high-frequency trading for why they’re not. When you can make billions off pennies, that’s what you get. For more on that, you can start with this Mark Cuban interview.

Find the original article at: http://bernardo.ws/2014/02/21/did-google-kill-innovation/



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