When big companies kill internal products

4:41 pm - Wed, Nov 2, 2011: 83 notes

When big companies kill internal products

Most big companies kill internal projects and products.

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And google seems to be doing a lot of this. In recent memory google has nuked google wave, buzz, health, jaiku, dodgeball, sidewiki. and I’m sure I’m forgetting stuff.

Some of these things make sense. And I applaud google’s attempts to try lots of things.

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The reason why a big company can and will nuke an internal product with ease is because it doesn’t move their needle. Their needle is too big and their weight to too heavy.

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gbattle sez:

Bijan nails a great point here, but let’s add some teeth to his statement by focusing on Google. Google revenue projections for 2011 are in the $30-32 billion range, 97% of which are from advertising, the bulk of that is from contextual ads via AdWords evenly split between on-property and AdSense. With 20K employees, that’s about $1.6 million of revenue per employee per year.

Google can apply traffic leverage to any idea, which is a double edged sword. Sure, they can throw users at any product they wish, but they don’t get to perfect products under the radar outside of scrutiny for months or years. This is how most startups find value and opportunity, maneuvering nimbly amidst the whales like Google.

So, how much does a new Google product have to make make to move that needle?

Well, a 1% move would mean a $320 million, or about the amount that Groupon, the fastest growing startup ever, made in 2010, and Google valued at $5.75 billion (granted, this valuation bakes in the synergistic growth value of applying Google’s aforementioned rocket fuel of distribution to the Groupon model).

Think of how long it takes a startup to get to $320 million revenue run rate per year - the customer & revenue discovery, the iterations & pivots, the funding, the recruiting, etc.. Compress that into a 6-12 months, the lifetime of Google Wave and Buzz, and you see why these non-core internal products are doomed.

Now do the same type of calculation for Apple and Microsoft ($108 and $70 billion top line revenues respectively), and you’ll fast understand why neither one gets social right either.