Google's Long Shadow

Somewhere, a retired small-store owner is reading the New York Times and smiling ...

This is a condensed version of an article they recently published:

The Google Effect: It's Got Wal-Mart and Others Worried

by Steve Lohr

Wal-Mart, the USA's largest retailer, strikes fear in the hearts of its competitors and suppliers. Makers of goods from diapers to DVDs must cater to its whims. But there is one company that even Wal-Mart eyes warily these days: Google, a 7-year-old business in a seemingly distant industry.

"We watch Google very closely at Wal-Mart," said Jim Breyer, a member of Wal-Mart's board.

In Google, Wal-Mart sees both a technology pioneer and the seed of a threat, said Breyer, who is also a partner in a venture-capital firm. The worry is that by making information available everywhere, Google might soon be able to tell Wal-Mart shoppers if better bargains are available nearby.

Wal-Mart is scarcely alone in its concern. As Google increasingly becomes the starting point for finding information and buying products and services, companies that even a year ago did not see themselves as competing with Google are beginning to view the company with some angst, mixed with admiration.

Google's recent moves have stirred concern in industries from book publishing to telecommunications. Businesses already feeling the Google effect include advertising, software and the news media. Apart from retailing, Google's disruptive presence may soon be felt in real estate and auto sales.

Google, the reigning giant of Web search, could extend its economic reach in the next few years as more people get high-speed Internet service and cellphones become full-fledged search tools, according to analysts. And ever-smarter software, they say, will cull and organize larger and larger digital storehouses of news, images, real-estate listings and traffic reports, delivering results that are more like the advice of a trusted human expert.

Such advances, predicts Esther Dyson, a technology consultant, will bring "a huge reduction in inefficiency everywhere." That, in turn, would be an unsettling force for all sorts of industries and workers. But it also would reward consumers with lower prices and open up opportunities for new companies.

Many a local supply store was shuttered in the name of Wal-Mart's self-described 'service to the consumers' by slashing product prices by virtue of their ability to smash overheads with massive volume discounts that no independent owner could match. Their presence in both urban and rural areas has significantly neutered the unique nature of main streets and shopping centers.

Now, it seems another phenomenon is forthcoming that could alter the landscape again, and if Wal-Mart wants to be a part of it, some serious re-thinking might be in order.

As the New York Times article states, the effects will be far-reaching:

Among the many projects being developed and debated inside Google is a real-estate service, according to a person who has attended meetings on the proposal. The concept, the person said, would be to improve the capabilities of its satellite imaging, maps and local search, and combine them with property listings.

The service, this person said, could make house-hunting far more efficient, requiring potential buyers to visit fewer real-estate agents and houses. If successful, it would be another magnet for the text ads that appear next to search results, the source of most of Google's revenue.

In telecommunications, the company has made a number of moves that have grabbed the attention of industry executives. It has been buying fiber-optic cable capacity in the United States and has invested in a company delivering high-speed Internet access over power lines. And it is participating in an experiment to provide free wireless Internet access in San Francisco.

That has led to speculation that the company wants to build a national free GoogleNet, paid for mostly by advertising. And Google executives seem to delight in dropping tantalizing, if vague, hints. "We focus on access to the information as much as the search itself, because you need both," Schmidt said in an analysts' conference call last month.

Not many lamented the loss of the village blacksmith. Superstores like Wal-Mart made the five-and-dime store a historical footnote. Now, as appears inevitable, it's their turn to either adapt or watch the world pass them by. If they go, it would be noted with much less sentimentality than there was for their predecessors.

Personally, I'm all for the change. I'm well on record as advocating more e-commerce as a means of improving the quality of living. I actually believe that cyber-markets replacing hypermarkets may indeed lead to more commercial investment into service industries that are more unique to their local communities. After all, niche conveniences --- specialty restaurants or customized services, for example --- would be more difficult to suspersede in cyberspace.

If this scenario ultimately proves to be accurate, the result could be the best of ironies: Centralized merchandising would precipitate greater personalization in local merchants. Main streets and shopping centers would regain distinct identities. There might even be room for a metamorphosed Wal-Mart.

Internet search, like personal computing in its heyday, is a disruptive technology, Wal-Mart director Breyer said, threatening traditional industries and opening the door to new ones. "We think there is plenty of opportunity for innovation in the Google economy," Breyer said.

I, for one, am ready to see it.