When I look back at 2015, I am reminded that we started out with the idea of “Peak Google”. It was not only Ben Thompson, but other analysts too chimed in with this theme.
However, this hasn’t happened. At least not yet.Google’s revenue and profits are as strong as ever, and the end of search volume is nowhere in sight.
So were Ben Thompson and other analysts wrong?
Well the question really isn’t who is wrong or right. The problem is that the analysts were not providing enough information to be proved wrong or right in the first place.
In the case of Ben Thompson, he provides a disclaimer;
Still, I hope the subtle point I’m trying to make is clear: I think Google is quite safe when it comes to search, and that they will be a very profitable company for the foreseeable future. I just suspect we will all think differently about that dominance when it’s a small percentage of total digital advertising, just as we thought differently about IBM’s dominance of mainframes in the age of the PC, or Microsoft’s dominance of PCs in the age of the smartphone.
He makes it clear that one will be able to neither validate nor disprove his statement based on Google’s finances, and that he is talking about the fuzzy term “dominance”. And as expected, no clear definition of how “dominance” should be measured is provided.
And that’s what most shrewd analysts would do to cover their behinds, so that’s OK.
So how should we really think about the situation?
Companies don’t live forever
IBM and Microsoft seemed utterly invincible in their heyday and yet, they have lost a lot of their power now. There is a lot of discussion about how long companies will live, and right now, the average lifespan of a company in the S&P 500 is a mere 15 years. If we looked at tech alone, the lifespan would probably be much shorter. Hence even if you were to randomly predict that a company would decline in the next 5-10 years, you would still probably be right.
It’s harder to predict how companies will survive
Given that companies will tend to die in a short span anyway, discussing how they will die isn’t very constructive. It doesn’t add much value to the prediction that companies will die pretty soon anyway. It’s much harder, and much more relevant to discuss how they could survive. That is, one should presume that a company’s present business will surely decline. On top of this, one should strive to seek out what it’s next business could be. Regarding Google, calling Peak Google based on a prediction of the demise of its search advertising business doesn’t add much. It will happen, and no matter how hard you discuss, you will not get an accurate prediction of when. Instead, one should look at what Google’s next business could be, and if they are making significant progress on that. One should look at how Google could survive when (and it will surely come) the search ad business collapses.
When is almost impossible to predict
Let’s look at some very nice charts from Pingdom.com, showing revenue/profit trends for Apple, Microsoft and Google.
What you can see is that Apple posted record revenues up until 1995. Although they were starting to have issues with profits since 1993, there was little to suggest that they would experience a total collapse in 1996. Just like very few economists could see the Global Financial Crisis coming, complex systems often show catastrophic behaviour. That’s why predicting the when is so hard.
Proof of “Peak Google” has not come this year, and in my opinion, this shows more than anything that predicting the when is hard, almost impossible. Although Ben Thompson was shrewd enough to not make any predictions, some analysts were not. My advice would be to stop trying to predict “Peak Google” or peak anything for that matter, treat the decline of any business as a given, and focus on what that company may have in store for the future.