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The Long Game – Google and eBay (updated)

by Randall Craig on October 11, 2007

Filed in: Blog, Strategy

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Not long after writing about the Long Game with respect to career planning, I was thinking about the same thing at the corporate level.

Of course, with corporations, the Long Game concept is usually called “strategy” and is the result of “Strategic Planning”. Or is it? There are two interesting examples that recently hit the news: the contrasting fortunes of eBay and Google.

eBay: In case you aren’t familiar, a few years ago eBay spent a few billion dollars to acquire Skype, the internet phone company. While analysts generally agreed that the transaction was significantly overvalued, eBay-boosters spoke about the reasons why the transaction made sense:

– It would improve the “community” aspect of eBay by allowing better communication between players.
– It is a pre-emptive, defensive purchase, against Google, Microsoft, and Yahoo.
– It would provide access to peer-to-peer technology, in the same way that eBay’s earlier purchase of Paypal provided access to payment technology.
– It was a vastly growing segment of the market.

No matter the rationale, recently eBay took a $1.4 Billion write-down. The Long Game didn’t pay off. Or, it was paying off, but not fast enough financially.  Skype was later sold to Microsoft.

Google: Google has also had a history of growth, funded both through acquisition and internal R&D. Their acquisitions ranged from geographic mapping, to radio advertising software, to YouTube, to Blogger: over 24 companies in the last two years alone. Beyond this, their engineers are told to spend 20% of their time working on projects that interest them. These Long Game activities turned into Gmail, Adsense, Google News, and a full 50% of Google’s new services. (HP in it’s heyday had the same type of rule.)

While it is still uncertain whether YouTube will actually be worth what they paid for it, this particular acquisition is a great example of the Long Game: how long before they sell advertising to commercialize the vast library of clips? (They could sell “play-before” clips, CNN style overlays, post-clip banners, etc.)  Update:  Google is doing this, and far more – and YouTube is the 2nd most used search engine, behind Google itself.  The purchase seems like a bargain compared to the valuations of more recent transactions.
— ——-
The toughest question for most CEOs and planners is figuring out how to have your Long Game look more like Google’s than eBay’s – especially given the quarterly pressure of the public markets. If you make no investment (and therefore take no risk), then there will definitely be no return. If you invest based solely on hunch (or ego), this is also a gamble. In my view, Long Game strategy is simply putting one foot in front of the other – but with your eyes firmly planted on the horizon.

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Randall Craig

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About 

Randall has been advising on Web and Social Strategy since 1994 when he put the Toronto Star online, the Globe and Mail's GlobeInvestor/Globefund, several financial institutions, and about 100+ other major organizations. He is the author of seven books, including the recently released "Everything Guide to Starting an Online Business", and speaks across North America on Social Media and Web Strategy. More at randallcraig.com and 108ideaspace.com.

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