My last column was about Eric Schmidt losing his CEO job at Google and how that company’s failed bid for GroupOn may have been a factor in Schmidt’s demise. Weep not for Eric, who lasted in the CEO position for 10 years and earned $5.6 billion, which puts every other U.S. CEO to shame, even Steve Jobs. It’s interesting to consider Schmidt’s career arc and how he got where he is (isn’t?) today.
Eric Schmidt started his post-academic work life at Sun Microsystems where he loved all the smart people but was ultimately frustrated by management that he felt was simply not as smart as he. Remember Scott McNealy was in charge of Sun when Schmidt left and McNealy rightly admitted that Sun’s 1990s server ascendancy with the Internet bubble was a happy accident as was Java.
Schmidt moved-on to Novell, another company filled with smart people but also a company in crisis or they never would have considered a non-Mormon for CEO. There he slammed into a culture with completely different values, one where he was ineffectual because as an outsider he simply never got it. Schmidt came away from Novell determined that the best way to find a suitable culture for his brilliance was by building it himself.
When Andy Bechtolscheim introduced Eric to Google co-founders Larry Page and Sergy Brin, Eric quickly saw this as his chance to create another Sun from scratch with himself as CEO while avoiding the entrenched cultural problems he had faced at Novell because almost everyone would be a new-hire. That was 24,000 Google employees ago, so what we see in Google today is definitely a reflection of Schmidt — an intellectually curious but not especially passionate outfit.
I believe it is this lack of passion that ultimately came to hurt Schmidt at Google.
Is this likely to change with Larry Page as CEO? I think it will a bit. Page is more passionate than Schmidt. His view is less stratospheric and he allows himself to be a little more vulnerable. But this very vulnerability will be his downfall because most of what he does isn’t likely to succeed and that will tell on Page very quickly.
How long again did Jerry Yang last as CEO of Yahoo?
Now to GroupOn, which recently spurned a reported $6 billion buy-out bid from Google. I posed the idea in my last column that $6 billion was too much for GroupOn as a company that seems to have no proprietary (and therefore protectable) technology and a lot of emerging direct competitors.
Then I read this week an excellent paper by the very clever Ahmadali Arabshahi that analyzes the GroupOn business model showing why be believes it is such a perfect fit for Google. Remember my point wasn’t that the merger was a bad fit, just that it was too expensive and Google should instead build it’s own GroupOn-type service I called GoogleOn, which they now appear to be in the very process of doing.
Ahmadali sees synergy for Google with GroupOn’s Chicago-based sales force. But he sees even greater potential in what Ahmadali calls “price discovery” — Google’s ability to use what it knows about our consumer behavior right down to MAC addresses and gmail content to individually price each daily offer so the optimal number of us accept its terms. Remember that’s the basis of a GroupOn — a substantial discount on some local good or service offered for only one day and to be paid for up-front.
The weak spot in GroupOn’s business model, as Ahmadali notes, is that it is hard to scale a single offer per market if you aren’t selling exactly what that market wants at exactly the price it is willing to pay. He thinks the algorithm jockeys of Google could optimize GroupOn and make it even more of a commercial juggernaut.
Against this my friend Ed Kohler from Minnesota raises some very well-informed concerns. The GroupOn sales force may be over-rated, Ed thinks, but more importantly the GroupOn deals aren’t even as good as can be found on sites like restaurants.com.
I didn’t know that, did you?
Add to this the fact that a small percentage of GroupOns are paid-for but never redeemed (the company and its partners surely count on this for substantial extra profit) that GroupOn risks alienating we normally docile consumers. We may be stupid but eventually we catch-on and GroupOn, having turned-down Google’s $6 billion, might shortly fade as just another Internet fad.
I come down somewhere in the middle of this argument, less concerned about either Google or GroupOn and more concerned about, frankly, me. This is an old story. I wrote a column years ago at pbs.org arguing that pages like this could be easily paid for not by advertising but by readers throwing coins in an electronic tip jar. The very next week PayPal invented PayPal Donate to solve this problem (I still have the e-mail from PayPal thanking me for the idea) but PBS would never let me use it. Time to start thinking again.
I believe there’s a logical extension of the GroupOn business model to almost any affinity group, an example of which could be the readers of this rag. What if I eliminated ads entirely and replaced them with a quarterly chance to buy something at a huge volume discount? It would have to be something most of us would like to have and the discount would have to be very real (you tell me what that would be).
If a few thousand of us were captivated by the offer this space could be easily sustained ad-free. It’s an idea I have toyed with in many forms for the last couple years. Not long ago I came up with the idea for a new form-factor PC I thought could serve as the first offer. I’d sell them under the CringeCo label, I thought, though they’d be made, like everything else, somewhere in Asia.
Alas what I thought I’d invented was essentially an iPad. I had a couple advantages but not enough to really compete, so the offer never happened. Yet the business model I think could still be a success for mid-size web pages like mine.
Let a thousand GroupOns grow.