Colony begins by effusively praising the company. “The Web has gone through two major phases in its short history: pre-Google and post-Google…Sergei Brin and Larry Page, Google’s founders, may go down in history as the guys who saved the Internet.”” A bit sweeping, IMHO.
But Colony is setting up a straw man, and he goes on to knock it down. “Is Google’s search good? Yes. Is the company worth tens of billions? No.”
Colony is reacting to the (now rather attenuated) Google-Will-Save-The-Valley-Through-A-Huge-IPO meme. He lists three factors that he says proves Google is not worth what the Wall Street crowd is whispering. First, competition – Yahoo, MSFT, etc. Second, low barrier to switching (ie, a better search engine can come along, and folks will simply switch to it). Third, it’s still early in the web ecology, and there will be a lot of change, including a waning of the core value upon which Google is based – the economy of links (Colony argues that XML etc. will change the basic shape of how the web works).
Colony concludes that a Google IPO in the $6 billion range would be defensible, but a $15 billion+ IPO would suck the capital out of the market and be very bad for the tech world. “The company’s primary strategy should be a diversification beyond search and the “we’ve got the best technology” syndrome into a defendable market position,” he says in summary.
There’s really not a lot of new thinking in here, but the response to the piece so far indicates the world was ready to hear this – it’s another course correction in the media’s ongoing love affair with search in general, and Google in particular. It’s also a fine way for Forrester to get some contrarian-tinged PR. The comments section on the piece, again available only if you register, points out some of the weaknesses in Colony’s analysis, in particular the idea that there are no barriers to entry, and that Google is too search focused (orkut, anyone?).