Google sparks fear in hearts of big retailers

Even Wal-Mart sees potential of Internet giant Like Web surfers, shoppers may start with search site

NEW YORK—

Wal- Mart, the largest U. S. retailer, strikes fear into 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 highspeed 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 would also reward consumers with lower prices and open up opportunities for new companies.

Google, then, may turn out to have a more far- reaching impact than earlier Web winners like Amazon and eBay.

“ Google is the realization of everything that we thought the Internet was going to be about but really wasn’t until Google,” said David Yoffie, a professor at Harvard Business School.

Google, to be sure, is but one company at the forefront of the continuing spread of Internet technology. It has many competitors, and it could stumble. In the search market alone, Google faces formidable rivals like Microsoft and Yahoo. Microsoft in particular is pushing hard to catch Google in Internet search. “ This is hypercompetition, make no mistake,” said Bill Gates, Microsoft’s chief executive.

Still, apart from its front- runner status, Google is also remarkable for its pace of innovation and for how broadly it seems to interpret its mission to “ organize the world’s information and make it universally accessible and useful.” The company’s current lineup of offerings includes software for searching personal computer files; an email service; maps; satellite images; instant messaging; blogging tools; a service for posting and sharing digital photos; and specialized searches for news, video, shopping and local information. Google’s most controversial venture, Google Print, is a project to copy and catalogue millions of books; it faces lawsuits by some publishers and authors who say it violates copyright law.

Google, which tends to keep its plans secret, certainly has the wealth to fund ambitious ventures.

Its revenues are growing by nearly 100 per cent a year, and its profits are rising even faster. Its executives speak of the company’s outlook only in broad strokes, but they suggest allbutunlimited horizons.

“ We believe that search networks as industries remain in their nascent stages of growth, with great forward potential,” Eric Schmidt, Google’s chief executive, told analysts last month. 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 fibreoptic 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. Telecommunications executives are skeptical that Google could seriously eat into their business anytime soon. For one thing, they say, it will be difficult and expensive to build a national network. Still, they monitor Google’s every move.

“ Google is certainly a potential competitor,” said Bill Smith, the chief technology officer of BellSouth, the Atlanta-based regional phone company. The No. 1 rival to phone companies in the Internet access business, Smith noted, is the cable television operators. “ But do I discount Google? Absolutely not,” he said. “ You’d be a fool to do that these days.”

In retailing, Google has no interest in stocking and selling merchandise. Its potential impact is more subtle, yet still significant.

Every store is a collection of goods, some items more profitable than others. But the lessprofitable items may bring people into stores, where they also buy the high- margin offerings — one shelf, in effect, subsidizes another. Search engines, combined with other technologies, have the potential to drive comparison shopping down to the shelfbyshelf level. Such services could lead to lower prices for consumers, but also to relentless competition that threatens to break up existing businesses.