What Chrome reveals about Google's long-term strategy

This post outlines my sense of Google's long-term market strategy, in light of its Chrome release. As a pithy slogan, I would call Google's strategy "1 + 1 + 1 = 1." Or maybe "Three Pillars Make An Institution."

Please allow me to explain.

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GOOGLE'S STRATEGY is to become a utility-grade platform for transacting the world's information. In this case, the meaning of "utility" has two distinct and important meanings. In one sense, "utility" is analogous to the power company or the water company in terms of being a "natural monopoly" -- i.e., everyone in my neighborhood has exactly one choice for their electricity provider (NSTAR). In the operational sense, however, "utility" is not meant as a provider but as a transaction platform -- analogous instead to how although NYSE provides the scaffolding for the world's financial transactions, the NYSE does not really own or trade stock on its own exchange (it merely allows others to do so).

For a decade now, Google has been working steadily to aggregate and organize ALL of the world's information, one careful step at a time. They want to be the world's information software platform. If done successfully and responsibly, this has enormous upside for macroeconomic efficiency -- akin to the advent of paper currency to replace the barter economy. If Google achieves its aim, we will truly have an "information economy" -- brokered as much by Google, Microsoft, and IBM as by banks, investors, and financial accountants (note: the "financial" adjective here is critical as a qualifier).

In doing so, however, there are a number of pitfalls that Google must avoid in satisfying its grand quest. I think of these as the three core pillars supporting Google's long-term strategy:

1. PROFITABILITY. As a public company, Google has an obligation to return growing profits. In the long run, this requires growing business interests -- operational efficiency gains may allow for proximate profitability boosts, but this is merely a tactic that reaches an asymptote if taken too far or too singly. Instead, capturing, deepening, and/or creating new markets and new customers and new revenue streams is vital for a public company like Google -- especially when your growth strategy is as broad as "organizing the world's information." So far, Google has done this very successfully through AdSense, but most people admit that AdSense (in its current manifestation -- this caveat is critical) will not shore up profitability indefinitely. Rather, I think of AdSense as "Google monetization lever, v1."

2. "PLATFORM" STATUS. First and foremost, Google must enjoy a monolithic, platform-level center of gravity in the information industry. Without this, Google will never have access to enough information to grow to the pervasive ubiquity required as "information organizer of the world." Google Search did much to make Google a platform, but trends like the "social Web" and cloud computing are likely to eventually wipe this out as a sustainable platform enabler. Google Apps has helped extend the platformability of Google, but this too may have a shelf life. Chrome is a further continuation and extension of Google as a true platform giant. And importantly, it beats back companies like Microsoft that want to sweep true "Internet platform" status out from under Google's feet. In that sense, Chrome is an extremely powerful way for Google to protect its flank -- in which the "flank" is maintaining the platform status that supplies a robust and comprehensive set of metadata that can continue to monetize AdSense and its successors (once again, the qualifying phrase is critically important).

3. TRUST. Despite the scoffing of many observers, Google takes user privacy and consumer trust incredibly seriously -- almost to the point of zealotry (to see their philosophy laid bare, check out, for instance, Google's testimony before Congress about China data-privacy concerns: http://googleblog.blogspot.com/2006/02/testimony-internet-in-china.html). Without qualification, it's vital that Google be obsessive about user trust and privacy concerns. As soon as Google loses the public's trust to safeguard our data and our identities, they're finished.

And Google's demise in this way would come *incredibly* fast, I guarantee you. In effect, we will all simply decide to move our lives to platforms like Hotmail rather than Gmail, or AIM rather than G-Chat. Google has nothing to keep us other than the strength of its solutions and the trust it has earned from us. For most people and most uses of Google, there are very few sunk costs, other than the development of personal behavior habits (and perhaps some core "data" that you were foolish enough not to back up on an external drive somewhere).

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These three pillars add up to one clear purpose -- "organizing the world's information." In this way, Google is quietly building an institution of enormous value and import. The Industrial Age came to be organized around mass production, transported by railroads (and then trucks and planes as well), and supported by institutional banking. In contrast, the Information Age is shaping up to be organized around collaborative knowledge production, transported by the Internet, and supported by Google. Our next great "financial system" will not come as a direct replacement to the banks and stock exchanges that have suffered in the recent credit crisis. Instead, tomorrow's "financial institutions" will be information providers ("banks") and information exchanges ("stock markets"). Money will probably not go away, but it will take a backseat in influence to the infrastructure of information flow. Information, not financial capital, will be the primary lever for moving and organizing the world's economy.

In this race, Google is vying tooth-and-nail with the likes of Microsoft, Facebook, and others. Microsoft had been trying to build an "Internet OS" to replace a dying Windows business model; and recent evidence had given indications of potential Microsoft success in doing so. Now, however, I think Google Chrome has changed that -- and effectively put an important first nail in that coffin. Microsoft may have to look elsewhere to claim the "majorly big platform" status which is becoming akin to "information banking institution" status. Importantly, however, this is not a singular race -- just as there are many different banking institutions, Google and Microsoft are unlikely to completely obliterate each other. But one could certainly become the dominant force and de facto path-decider of the "information platform" industry more than the other.

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Chrome's release today is further evidence that "organizing the world's information" is WAY, WAY, WAY more than just a catchy, feel-good corporate slogan. Rather, it is a fully-fleshed (and incredibly well-conceived) corporate strategy. Google Chrome, for all its power and coolness (which I've already tried and thoroughly enjoyed), is fundamentally nothing more than a "product complement" within the Googleplex pantheon. Google doesn't care at all if Chrome turns a profit. From a corporate strategy perspective, Chrome was built to defend Google's flank -- i.e., to preserve its core competitive moat of "Three Pillars Makes An Institution."

And here's the amazing thing -- I don't it makes much difference whether people know what the core of Google's strategy really is. In fact, Google's been trying to tell us all along -- they are "organizing the world's information." We just haven't been particularly good listeners yet. My hope, of course, is that once we listen better to what Google is really doing, we can also get down to business: competitors can keep forcing Google to work hard for its vision; governments can start to regulate appropriately the major information firms (Google, Microsoft, Facebook, etc.) as if they were investment banks or electricity companies; and entrepreneurs can keep dreaming up ways to extend and connect the Information Economy as it grows into a more definite shape.