Perhaps the big difference between Google now and Yahoo then is: Google has more cash than they know what to do with. They aren't "taking a gamble" on some new markets, think of it more like VC. As long as they monetize a couple things in a pile of ideas, they win.
I think they do a pretty good job of keeping it from diluting their brand, too. Somewhere after GMail and Google docs, they stopped branding stuff outside their search business with a big bright Google logo -- rather, most things keep their own brands (YouTube, Lively, Orkut, etc.) even thought they are Google companies. As a result, if I ask my mom, "What's Google for?" She'll say, "Looking stuff up on the internet."
The problem is that they are not seen as a VC. So when one of their projects fails people say look google has failed, they are losing their focus, they have peaked and now they're going down.
And that means more money will go into stuff that google competitors are doing because now they can say to their investors, look, google can be beaten.
They will stop selling their businesses to google at the earliest possible moment. More startup founders will be willing and able to go it alone, and fewer will want to go work for google just to watch their baby flounder like all those other half hearted me too projects.
There's another reason why they cannot act like a VC. Much of what they do needs size and network effects. If people doubt that a particular app has a future, it doesn't get traction, which means it's not going to get big fast. An app by a big vendor that doesn't get big fast is not geeky and cool, it's dead in the water and totally uncool.
Microsoft has lost its influence long before their profits started to go down. That's why google absolutely needs focus and they need to be very convincing. They need to be so cool and then they need to say, oh and by the way, we'll crush any competition, so don't even try!
First, let me say, your comments are very insightful. You force me to amend my position a bit. :-)
Regarding your first point -- you are right. Google can't really be like VC. As a company, they are not expected to have failures. Looking at their trading history in 2008, it looks like concerns over stuff like monetizing YouTube is kicking them in the reputation.
I think, however, that they are also suffering from a thing that the media loves to do -- turn in its darlings. Once a "gee-whiz" media baby stops being exciting because of its newness, it is popular to try to take the "darker" angle on it. I think this started in the geek community with the Google in China business a few years ago, and now it's hitting the wider world. I think this would be a problem for Google regardless of their product strategy.
I also suspect that, while Google can't be like VC, they're not really like normal companies, either. I think people expect them to be a little more experimental and to fail a little bit more often -- although, on a smaller scale than YouTube. I think that people still think, "Small failures from Google are just signs of progress." It probably wouldn't hurt them to be a bit more conservative right now with their stock taking a dive.
Finally, I don't think that Google has lost their geek-hipness just yet. I, for one, still think tha Google spits out a couple interesting services every year. They aren't us cool as they used to be, and the Google cool factor will probably wear off for them eventually. But, as one of my co-founders says, they can "burn that bridge when they get to it."
Treating Google as a VC is in fact what I'm doing right now.
PG and YCombinator and all of the associated acquired Google companies have significant mindshare in the startup world right now. Most of these people are pretty fine with working with Google as a proxy VC. And as Google gets more and more of these it will become less and less of an issue, in the public mind, to treat a product failure as a google failure.
And while they may have dropped the ball a few times, they are one of the best acquiring companies by far, and ona scale of VCs they are probably among the best.
Remember that 'Black Swan' article from a few days ago?
Minimize your downside extremal risk exposure, and maximize your upside extremal risk exposure (20%, Lively, etc.)?
Well, the writer of this piece apparently didn't. The instant any of these things starts draining resources directly from their core business, then GOOG investors can start panicking. Meanwhile, the GOOG seems to have taken the lessons of the market to heart. Not unlike YCombinator -- lots of little dollops of money into little baskets, most of which will never be seen again, but a handful of which can generate such absurd upside that the foregone dollops are but an afterthought. Google seems to get this.
You'd think their entire business was originally based on probable inference, or something...
To elaborate a little, I don't see any attempts at other markets as a bad sign from google or as behaving yahoo-like as long as they stick to their core principles of simplicity for everyone, including the power users.
If Google didn't come up with new things once in a while, the article we'd be reading would be called "Google is boring me" and the thesis would be "why doesn't google come up with anything new? they must be dying."
To me Google has the core search and advertising down stat. They have that monopoly and will do anything to keep it.
But like someone said they have so much cash and so many employees they can afford to get into every single market on the web. If it succeeds? Great, more money to the bottom line. If it fails? Oh well, we only lost .000001% of our resources trying for it.
And if its really a business they want to get into, one where they'll get a lot of pageviews for their ads, they'll just buy up the competition. Because they can afford to pay 100 million without really flinching.
Google should actually setup an incubator for external extrepeneurs, providing funds, infastructure and a supportive community - imagine the dealflow and ideas it'd receive.
Google has been like this for a long time. And its one of their biggest assets in my opinion!
Microsoft needs to keep a good focus. But Google and Yahoo? I don't think so. Obviously they shouldn't do something really unexpected, but if they can carry on improving and creating apps/sites - why the need to stop?
Google considers everything it does a mechanism to get folks to use Google's properties and to create more ad-revenue.
A TV network analogy would be that Apps, Lively, Earth etc. are programs. We tune into Google because it has the best programs. And then get served ads.
Google have always said they had no interest in producing content themselves... some of those products are definitely reversals on that decision. That may be the right thing to do, but it's definitely a change.
I think they do a pretty good job of keeping it from diluting their brand, too. Somewhere after GMail and Google docs, they stopped branding stuff outside their search business with a big bright Google logo -- rather, most things keep their own brands (YouTube, Lively, Orkut, etc.) even thought they are Google companies. As a result, if I ask my mom, "What's Google for?" She'll say, "Looking stuff up on the internet."