The Unbearable Lightness of Google and Yahoo

Yahoo, Google and Hewlett Packard were all started by Stanford students, but there the similarity ends – only HP has a sustainable business model.

The Evil Empire wants to buy Yahoo for $45 billion:

Microsoft Corp. has pounced on slumping Internet icon Yahoo Inc. with an unsolicited takeover offer of $44.6 billion in its boldest bid yet to challenge Google Inc.’s dominance of the lucrative online search and advertising markets.

Meanwhile Google tanked to a mere $150 million:

More than $11 billion (£5.5 billion) was wiped off the market value of Google late last night as the internet darling missed sales and profit targets after years of defying gravity… Shares in the company fell by nearly 7 per cent…

But they’re just search engines!

Their revenues come from clueless advertisers who don’t know people block their ads! They waste their money on vanity projects like Google earth! And when a recession cuts advertisements, their revenues will evaporate!

They both sell their users out to the Chinese dictators, so occupy the moral low ground – a terrible place for consumer companies.

And their technology base is trivial – there are plenty of Chinese, Russian, Indian, European, and Brit hackers capable of building much better search engines, and its only a matter of time before one of these kids gets enough finance.

After all, both companies were started by kids – Yahoo:

In January 1994, Stanford graduate students Jerry Yang and David Filo created a website named “Jerry’s Guide to the World Wide Web.” Jerry’s Guide to the World Wide Web was a directory of other websites, organized in a hierarchy, as opposed to a searchable index of pages.

In April 1994, “Jerry’s Guide to the World Wide Web” was renamed “Yahoo”.

That was innovative, since the Web had only been around one year, but had weak differentiation and so (my ellipsis):

Google began in January 1996, as a research project by Larry Page, who was soon joined by Sergey Brin, two Ph.D. students at Stanford University…the company was incorporated as Google Inc. on September 7, 1998 at a friend’s garage in Menlo Park (next door to Stanford).

Contrast these outfits with the original Stanford garage startup (my ellipsis):

William (Bill) Hewlett and David (Dave) Packard both graduated from Stanford University in 1934. The company originated in a garage in nearby Palo Alto (also next to Stanford) during a fellowship they had with a past professor at Stanford during the Great Depression.

The garage is still there, and so is HP. I’m not enamored of HP’s current management, but the company adds an enormous amount more value than Google and Yahoo combined. It’s #1 in the PC market, dominates desktop printing, and is a leader in enterprise server hardware and software. It doesn’t sell its customers out to dictators and has been a world leader in technology and products for over 60 years.

This company with its enormous customer base, highly competitive products and technologies, and (mostly) strong morality has a market value of about $125 billion – less than Google.

But in 20 years time, HP will still be there, while Google and Yahoo will be gone.

Thus proving that dot com madness didn’t end in 2000.


One Response to The Unbearable Lightness of Google and Yahoo

  1. Jeff Crump says:

    Search engines are very vulnerable to competition; the only barrier to entry is the url. Some clever ad campaign, possibility promising privacy, could change the market landscape.

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