Advertising Synergy
The reason Google became such a huge company in advertising via search was simple. Synergy. There are a lot of people searching for things they want to buy. In general it is some of most synergistic advertising of any media. All of Google's other products lack this synergy with advertising which is why they fail to generate anything like the same revenue.
Personally, I click on adverts that Google displays reasonably often. Since I got an Android phone I have never clicked on an advert in Android. I have never clicked on an advert in youtube. Likewise in gmail. I could continue. Google cannot claim the same premium for adverts on these media, and eventually people will want out. I'm not sure if Google abuse their monopoly position on search and force people to have adverts on other media in order to get adverts on search, but that would be essentially illegal in virtually any jurisdiction.
Google has a non too dissimilar problem with Microsoft. Microsoft have been raking in the dollars from Windows and Office for many many years, but have struggled to find other products that make anywhere near the same amount of money. Google have been raking in dollars from search advertising, but have struggled to find other products that can do the same. Both companies have tried to acquire other companies with promising techs, and both companies have thrown a lot of money trying to develop techs internally that stand a chance of success. In my mind though, Microsoft stand a higher chance of long term success. There are 2 reasons for this:
1) There is more friction to change in Microsoft's world. It is a lot harder to replace your operating system and office package than it is to switch search tools. I can envisage a world where Google lose half their customers in as little as a year, it is a lot harder to believe that will happen to Microsoft.
2) Microsoft seem more willing to be innovative. Odd though this sounds, I strongly believe it to be true. Microsoft seem willing to try and make money any way they can. They are happy to make hardware (Xbox for example), sell software (Office, Windows, etc.), sell services (Windows Live, Office 360), sell software purely through other hardware manufacturers (win phone). Google seem willing to do only one thing, try and write software that helps them to sell advertising. Google's only attempts at other things (like the Nexus One) were half-arsed.
Biting the hand that feeds IT
