Ask HN: What will happen to Google when somebody disrupts AdWords?

Short answer: As long as the portion isn't dominant in your portfolio, and you re-evaluate it at least twice a year and rebalance, its all good.<p>Longer answer, looking at Googles rates of return on capital is like watching a very, very, fast train driving along straight track. Google's nominal operating mode burns a lot of money, that burn rate leaves them vulnerable to down turns. What the most likely scenario is not that they get disrupted so much as others meet them at parity but run at an operationally much more efficient way. Say that M$/Bing inexorably creeps up into a neck and neck race with Google in terms of search reach, and the combination pushes down advertising rates. The spending brakes go on at the 'plex, the company changes, the bean counters rise in power beyond reasonable measure, and the company 'flips'. Out go the creative, inventive, people and in come the 'lifers' who know how to make their job look important without actually doing anything. The mechansim which makes this happen is really hard to avoid since from the board room things look fine, even after they aren't fine. And there is a fine balance of disbelief that is held between the employees and their condition that, once disrupted, cannot be re-established. Cisco, HP (Tandem), Sun, and Intel are all places where I've known folks who lived through the flip. Nothing is the same afterwards, if you can't re-invent yourself like Apple did, it gets a lot harder.<p>That being said, there is (as others point out) usually some time to cover for that.<p>I cannot stress enough however that financial planning is serious business and you should take your time with it. I believed them when they said if I started putting money in my 401K in 1986 that it would be worth multiple millions by now thanks to the 'miracle' of compound interest. They missed the part about the 'miracle' of the nations worst economic debacle deleting that value in a heartbeat. I don't believe them any more :-(

AdWords is a natural monopoly, so it is unlikely that someone will ever create a successful competing keyword driven advertising network. In order to generate high prices for the search ads, Google needs to have multiple bidders competing against each other for each keyword. Advertisers will only bid if there is lots of inventory to buy (lots of searches on those keywords). 10% of the search market does not generate 10% of search advertising revenue because of this lack of market participants -- on second tier pay-per-click advertising networks whole swaths of keywords are not competitively bid. The Bing-Yahoo search merger was an attempt to address this problem, but it hasn't worked so far according to the most recent financial reports. Google still generates 50% more revenue per search than Microsoft due to the network effects.

Not to make a "I think there is a world market for maybe five computers" type argument, but I don't think it's Adwords being disrupted that you should worry about. As long as people use Google to search for things, particularly goods and services, Adwords will be an effective way for businesses of all sizes to reach their target audience at a perfect time (when they're actively searching for what you're selling) and the auction system adwords uses automatically helps maximize profits across different keywords/categories.<p>That being said, not sure what your investment goals are, but if you're looking for the long term I'd suggest something more along the lines of a few broad ETFs that cover a few different markets, rather than trying to place a bet on only a handful of high flying companies... basically, are you looking to invest or gamble? Either is ok, but they are different...<p>edit: seeing a couple other comments, I'll admit that adblocking being included automatically in a browser that gains dominant marketshare is something that would be terribly disruptive to a lot of businesses, google included. What's interesting there, is it would essentially <i>destroy</i> a tremendous amount of revenue for large and small companies across many industries without offsetting it with a new profit center. It wouldn't be like cars replacing carriages, it would be like teleporters you can assemble at home with $5 of drugstore components replacing the auto industry. I guess consumers would win, but they'd probably have to start paying for gmail and google maps access...

You should be asking yourself not about disruption, but what would happen if GOOG can't figure out how to keep AdWords revenue increasing. Like other commenters note: nobody has ended up disrupting Windows on the desktop, but Microsoft never figured out a new stream of growth to fuel growth in their share price.<p>If your primary concern is share price growth, look at a smaller cap stock - or try to convince yourself that Android or one of their other projects will ever move the revenue needle.

Of course it's possible - the giants of today aren't always the giants of tomorrow.<p>But like the other giant corps their demise will be a very slow process with plenty of time and capital to find their next big thing.

Google will buy them out.

What happens when Adwords gets disrupted? Well, first, it will take a long time for the competitor to establish itself. Businesses don't change overnight. Second, even if the competitor manages to steal ALL of Google's income overnight, Google has billions in the bank.<p>There will be years for them to find a way to recover, or, in the absolute worst case, years for you to reinvest.

Google will be screwed. If something that works significantly better comes along, that money will evaporate very quickly. And when you take into account Wall St's grow or die mantra, the results would be catastrophic for Google.<p>However, I'm not sure it's possible to disrupt AdWords. Disruption in the classic sense implies "way cheaper, but not as good". You can't make advertising "way cheaper" without leaving metric tons of value on the table, and nobody is going to do that. After all, the quality of advertising <i>is</i> the price you pay for customers.<p>More likely is a scenario where everyone else catches up - but that's a slow process and will give Google plenty of time to find another trick.

If a company has access to hundreds of millions of profiles, can figure out an effective way of delivering targeted ads, and can effect a fundamental shift in the way most people find content on the web (i.e., a shift from keyword search to social search/sharing), then Google's advertising revenue could fall significantly. The obvious existing threat is Facebook. Facebook ads are not good enough yet, but could be relatively soon. I think the question for Google is whether it can catch up on social before Facebook catches up on search and ad targeting.

Diversification is usually a huge waste of money. It is hard for one company/culture to make money doing lots of things. Be glad they know their niche is ads and that they are doing everything they can to protect their castle (as a shareholder).<p>Relentlessness will enable them to hold on to their position for longer than other companies would. However, all companies will eventually fall to competitors as t approaches inf.

I've wondered this myself - what happens when ad blocking technology becomes integrated into mobile devices, or the general public starts to use it because the newest, shiniest browser now bundles it by default?

Google will be in the transportation and shipping business by then.

Brain scanning devices that will be used to navigate web browsers. ETA 5 years.