Monday, August 30, 2004 on misinterpreting Google

David Meier's excellent response to an analyst who is criticizing Google's business strategy:
    [Analyst:] Google needs to diversify its revenue base

    Okay, you lost me with this one. If you say Google is well positioned strategically, why diversify? That sounds like a surefire way to reduce returns on invested capital and destroy value, not create it. It draws resources away from their strengths and prevents them from strengthening their capabilities. Google needs to find the best ways to invest the pile of cash from the IPO, and "diworsification" is not the right way to do it.

    [Analyst:] Become more like a portal

    Man overboard!

    If Google is positioned so well and has a competitive advantage, why would it want to compete the same way that Yahoo does? Competing like a portal is not Google's specialty, and in doing so, it would forgo its unique position.

    The analyst can say whatever he wants about Google's stock price. But the analyst should check his logic before saying Google has a competitive advantage and yet should change its spots to look like everyone else in the fray.
[Thanks, Garrett French, for pointing out the article]

Update: David has a follow-up to his first article.

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