Google needs to diversify.After 14 years, more than 95% of its money still comes from online advertising, and most of that comes from search.
This is not for lack of trying. Over the years, Google has launched a many new products beyond search. Most of them don’t contribute much to Google’s bottom line, although some of them serve important strategic purposes.
Now, Google is making a big play for hardware. It’s the biggest and potentially riskiest shift in Google’s history.
Can Google win? Should it even bother trying?
To get a better idea, we decided to look at all the other businesses Google has entered and give a grade to each one.
Android has been a huge hit for Google. After spending about $50 million to buy a bare bones smartphone operating system in 2005, Google turned Android into the world's leading smartphone operating system in less than five years.
The only reason this is an A- instead of an A? Because, while the iPhone contributed more than $24 billion to Apple's coffers just last QUARTER, Android still doesn't make Google very much money. Google gives it away for free. The company says that it earns about $1 billion a year from mobile advertising, but a lot of that comes from other platforms -- including the iPhone.
Strategically, it may not matter. Google's whole point with Android was to make sure that competitors like Apple didn't block out Google Search -- or the mobile Web -- in favour of apps. Still, with the purchase of Motorola, it looks like Google wants a bigger cut of the pie.
Chrome is a lot like Android.
Here, Google came out of nowhere into a well-established market and quickly changed the landscape. Just more than three years after it launched, Chrome became the second-most popular browser -- ahead of Firefox. Internet Explorer is still bigger, but it ships on hundreds of millions of new PCs every year.
And like Android, Chrome serves a larger purpose -- making sure that third-party Web browsers don't break or block Google services, while delivering a speedy and reliable Web browsing experience, which keeps people online longer.
Chrome is also a free product, but nobody's making any money from Web browsers, so there's no reason to expect Google to do so either.
The other aspect of Chrome is Chrome OS, an operating system that is almost identical to the browser, but is meant to overcome some of the problems with Windows on cheap portable computers, or netbooks.
Chromebooks are cheap, start up extremely fast, are easy to update and patch, and run everything over the Web.
But they also don't support a lot of hardware -- good luck syncing your MP3 player, connecting to a printer, or getting photos from your digital camera -- and there aren't nearly as many apps available for them as there are for Windows. Plus, the entire netbook market has been crushed by the rise of the iPad.
Overall, this feels like an experimental project that sounded great back in 2007 when netbooks were hot, but has since been overtaken by events.
This isn't that much of a stretch for Google, given its deep relationships with advertisers who buy billions in search ads every year. Still, Google was nowhere in display advertising until it bought DoubleClick in 2007.
Five years later, Google runs one of the top display networks on the Web by reach, and display advertising is on track to bring in about $5 billion this year.
YouTube was a big risk for Google, coming with potentially billions of dollars in liability from copyright infringement lawsuits.
But the company handled it beautifully, resolving legal disputes with a way to take down copyrighted content on request, and has since turned YouTube into the most popular video site on the Web by a mile. In recent months, Google has enlisted a bunch of content creators to make exclusive shows and has reorganized YouTube into 'channels' rather than random videos.
So why a B? Because despite all those viewers, YouTube doesn't make much money for the company -- 2012 revenue is estimated to be no more than $1.6 billion.
Last summer, Google announced its long-awaited answer to Facebook: Google+.
The service has gotten more than 90 million sign-ups, but it's not clear how many of those people are actually using the service regularly. A lot of them might simply be logged into other Google services like Gmail and never pay Google+ a second glance.
Google might argue it doesn't matter because Google+ was never really about stealing people from Facebook. Instead, it's a way for Google get 'social signals' -- information about who you connect with -- to improve its other products. Facebook and Twitter apparently weren't willing to give Google all the info it wanted for a price it could stand, so Google decided to go it alone.
But that isn't working out so great either. Earlier this year, when Google added Google+ prominently to search results last month, the Internet punditry screamed bloody murder and published a bunch of articles about how they were going to switch to Bing.
Plus, there's a widespread perception that normal people just aren't using the service. Most of the interaction on Google+ comes from techies and Google employees. Not your mum or your old high school friends.
In short, Google+ is Google's best social effort yet -- way better than past failures like Wave and Buzz. But it's still too early to tell whether it's going to save Google from dinosaur status as we enter the social era of computing.
Google doesn't make consumer electronics products (at least not yet).
But it does provide software to other companies who build products based on that software. Unfortunately, those products have been awful failures so far.
Google TV's first edition was so bad that one of its launch partners, Logitech, had more returns than units sold in the first quarter of 2011 and its CEO called it an expensive mistake. The second version seems a lot better, but Google's promised groundswell of support at CES turned out to be more of a trickle.
Android tablets have also failed to sell, with the exception of the Kindle Fire -- which uses a custom Amazon browser, app store, and apps, with no connection to Google services at all.
This should've been a no brainer for Google -- there are lots of benefits to moving applications like email and document collaboration to the cloud, and Google was one of the earliest movers here.
But Google just doesn't seem 100% committed to the space. Individual Google applications like its spreadsheet still lack key functions, meaning that a lot of customers still need Microsoft Office. And now Microsoft is fighting back with its own cloud solution, Office 365. It's going to be a bruising fight, but Google gave Microsoft way too long to catch up.
Plus, from a revenue perspective, Google Apps is a tiny blip, with sales of less than $1 billion a year.
Don't get us wrong: we love Gmail and Google Apps. We're satisfied customers. We just know it could be so much better.
This part of Google's strategy is all over the map.
On one hand, local businesses show up in a lot of different places in Google search results. That seems reasonable, as it means more relevant search results for users, particularly on mobile devices, although some competitors like Yelp have complained that Google doesn't play fair.
But Google has also tried to get into in-store payments with the phone-based Google Wallet service, which is only supported on two phones and recently suffered a bad security breach. It's also trying to take on Groupon with a me-too daily deals competitor. Google also bought restaurant guide Zagat for $151 million, which is supposed to fit into this all somehow.
Someday, users might use Google to buy stuff directly from local businesses. But this, like social, is a work in progress.
Google's track record is mixed. On one hand, it does quite well when it buys complete businesses (YouTube, Android, DoubleClick) and refines them to move quickly into a new market.
But when it tries to enter new markets by building its own products mostly from scratch, it has a mixed record at best -- the Chrome browser is swell, but its local and social initiatives are a work in progress.
And its track record with consumer electronics devices other than phones is pretty awful. That doesn't bode well for its upcoming hardware efforts.