3 Ways Google Could Lose

After a mediocre Q2 earnings call and attacks from both piracy victims and privacy defenders, Google is still the online king. Can anything bring it down?

I think the answer is yes, for a lot of reasons. This week I’ll list just three areas of risk that Google faces. If you have any more Google doomsday scenarios, I invite you to post them on the Search Insider blog (there’s a link at the end of this article).

Risk #1: Recession. Ad budgets are the first to get slashed when the economy heads south. If the economy does go sour, it may not only be traditional advertising that gets hurt. Online advertising, including search advertising, may take a hit as well.

If you’re a leading search agency, there’s no need to fret. Smart advertisers understand that search advertising provides higher ROIs and better accountability than most offline channels. Since transparency and strong ROI are a must when budgets are tight, CMOs are likely to drive more ad budgets into search during hard times.

At least, that’s what the smart CMOs and CFOs will do. The not-so-smart advertisers will try to play it safe by pulling money out of search, and sticking with tried-and-true avenues like TV, radio, and print. Again, that’s not a problem for the major search agencies: we only need a few thousand big spenders to keep the industry humming.

But the outcome could get ugly for Google. Since Google needs everyone’s ad budget, an exodus of less-than-savvy advertisers could create real pain inside the Googleplex. And so if the economy does take a dive, Google may face trouble along with the rest of the economy.

Risk #2: Facebook. Could a social networking site overtake a top-tier search engine? As fellow Insider David Berkowitz wrote earlier this month, one has already come close. ComScore’s data from July points to MySpace as the fourth-most popular search destination on the Web, beating AOL by 139 million searchers.

Search share isn’t the only threat that social networks pose to the major engines, as the bigger threat revolves around who gets to be the Internet’s gateway.

In June, Slate writer Christopher Beam argued that, through its combination of open-source widgets and built-in network of friends, Facebook could become the new “do-everything site” where users live their online lives.

Google can certainly compete on the widgets front; Google Gadgets is loaded with new creations. However, Google’s social element is far behind the curve, at least in the U.S. -- where Google’s Orkut trails behind MySpace, Facebook, and even Friendster (although Orkut is much more popular abroad than it is at home). If Google can’t become the undisputed leader on the social front, it may find itself falling behind as communication becomes an even more critical part of the new Internet.

Risk #3: Employees. Since they’ve already made their millions, there’s little keeping Google’s first hires from heading off to start something new, become investors, or just spend time with family. Which is why one of the oldest -- yet ongoing -- dangers to Google, is the attrition of its original bright talent. Indeed, the San Francisco Chronicle reports that “100 of Google’s first 300 workers have quietly resigned” from the company already.

And while new employees threaten Google because they might leave, other employees appear to be hurting Google by joining it. Explaining the company’s lower-than-expected Q2 profits this year, CEO Eric Schmidt pointed a finger at the costs incurred by overhiring. Schmidt was quick to add that the new hires are well worth the recruiting cost -- but, of course, only time will tell.

Whether the new employees are really good or just plain expensive, what’s clear is that the Google workforce is changing. Meanwhile, Google has gone through more major acquisition activity this year than in any year prior, including the pending purchase of advertising Goliath, DoubleClick. And as Google expands into more lines of business like software and mobile, it will need to fill out its talent pool by buying still more companies -- which means more workers to oversee, and more corporate cultures to absorb beneath its umbrella.

As Google moves from hip startup to megaconglomerate, will it still be able to hold its ship together? We’ll have to see. If anyone can make the jump smoothly, Google can, but it will still be a monumental task.

OK -- for now. With a clear lead in search and predictions that it will take 90% of all searches by 2017, Google is doing all right.

But my question isn’t whether Google will keep control of search queries for the foreseeable future. My question is how long it can remain king of the entire Internet.

And since that’s still an open question, I’ll keep searching for an answer.