First signs of fiscal discipline at Google?

John Shinal · November 24, 2008 · Short URL:

Search giant shutters virtual world Lively after just four months

 Is Google starting to impose some semblance of fiscal discipline on its creative troops?

Now that the search giant has decided to shutter its virtual world, called Lively, after just a few months, it's a question that's at least worth asking.

Until last week, it's answer has been an obvious 'no'.

Perhaps no other U.S. company has funded as wide a range of projects in so short a period of time as Google.

This year alone, it launched a Web browser, a mobile operating system and, to enhance its Google Maps product, a space satellite. That's in addition to all the Internet services, from Gmail to iGoogle, that it regularly rolls out to help it sell more ads.

Killing projects quickly has never been a hallmark of a company that promotes innovation by letting its employees spend 20% of their time on their own ideas. 

While Lively got mixed reviews and was generating no revenue, that's been true of many of Google's non-search initiatives, which together contribute no more than a rounding error toward the company's top line.

This has been the irony of Google's many forays into unrelated markets. While they get lots of attention, they've done nothing for the company's income statement other than boost R&D spending.

True, some of the company's biggest money-losing products are part of a longer-term strategy, such as attacking Microsoft. That's why Google built Google Docs, its suite of Web-based software applications, and its Chrome Internet browser.

And its forays into the mobile software market with Android, and online video through YouTube, will help Google sell more search advertising -- if they are successful.

By that measure, Lively was a bit of a stretch, even for Google.

To date, the only way that virtual worlds such as Second Life have been able to generate revenue is through the sale of display advertising or virtual goods.

What's more, Google was very late to the virtual worlds game. Second Life, the most popular among them, is by some estimates generating close to $100 million in annual revenue.

But being late to a market has never stopped Google before. No fewer than six search engines were operating BEFORE Larry Page and Sergey Brin founded the company. In fact, none of the products the company has released since it went public have pioneered a new market.

Yet Google killed Lively before it even had a chance to become a serious alternative to Second Life and others. Maybe the company sees signs that growth in virtual worlds may not be as torrid as it's been.

Or perhaps the worsening economic turmoil has caused even Google to become a little more disciplined when it comes to spending on product development.  

The blog post announcing Lively's demise sounded almost buttoned-up by Google standards. 

"It has been a tough decision, but we want to ensure that we prioritize our resources and focus more on our core search, ads and apps business," Google said.

For Google, that kind of thinking is downright innovative.

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