Lessons Learned: Google's Schmidt Admits He Underestimated Facebook

"Regrets, I've had a few," sang Frank Sinatra in "September Song," one of

the most poignant in his iconic oeuvre. It sounded like Eric Schmidt was channeling the ghost of Ol' Blue Eyes when, in an interview at a tech conference, he acknowledged that this social thing might have gotten away from the Googlers early on.

Candor is always refreshing from business executives because it is so rare. Their corporate counsels and investor relations pros are constantly pummeling them to admit nothing they dont have to so as to avoid liability, untoward consequences and such like. Increasingly, however, as technology and software have given almost everyone who wants it access to the power of strategic insights, returns to transparency are greater than returns to secrecy.

In this case, one is tempted to wonder if yesterday's strategic error could be today's lucky stroke. IBM has recovered its preeminence by leapfrogging a couple of generations' worth of developments. Microsoft is still mired but one senses the blood stirring in Redmond as well. We know the social thang is big, but we still cant be sure where it is taking us. The greatest revelation from Schmidt's open musing may not be the specific topic, but that he said anything revealing at all. JL

Edward Harrison comments in Credit Writedowns:

"An interesting conversation (took place) between Pete Cashmore, the social media blog Mashable’s founder, and Margaret Brennan of Bloomberg Television. The two were talking about Eric Schmidt, the Chairman and former CEO of Google. The tech world is buzzing about Schmidt’s admission yesterday that Google blew it when they underestimated Facebook.

Now, Cashmore’s site is all about social media, the epicenter of Web 2.0. So, he knows what he’s talking about when it comes to new media. His view is that Schmidt is being too hard on himself for missing "the friend thing" because Google simply doesn’t have social DNA. Essentially, Cashmore is saying Google is all about search and advertising and that they can’t be expected to make a natural transition into social. It was also interesting to hear Cashmore talk about Nokia’s fall from grace and the symbiosis of a Microsoft-Nokia takeover.

Schmidt mentioned the “Gang of Four” Internet companies as Google, Facebook, Amazon and Apple. So, he’s saying in effect, “forget about Cisco, Microsoft and Intel”. I see this as another part of the paradigm shift in technology as it moves to a mobile-centric world.


Just a generation ago, people were chained to their IBM desktop computers. When the clone wars decimated IBM’s market, Microsoft and Intel emerged as Kings of the Hill. The Internet bubble was all about the move away from the Wintel duopoly. But mobile data was in its infancy. That world was still very much focused on the Internet as content within a Wintel-based ecosystem. Cisco, Microsoft and Intel were still major factors. The Internet’s “Gang of Four” back then was Yahoo, AOL, Amazon, and eBay.

Fast forward to today and we are really talking about the Internet as the new area of focus for content delivery. But now its a mobile world with Android and iOS as dominant platforms, not Windows.

Here are my questions:

IBM bled red ink in the first jobless recovery in the early 1990s. I think of them a little like Nokia today. How did IBM make the transition from also-ram PC maker to still leading edge technology company? Is there something in that model for others.
What’s with Amazon as the ONLY member of the Gang of Four during both the Internet bubble days and in the new Web 2.0 version? Remember, they were unprofitable and leveraged during the Internet bust and many thought Amazon would go bankrupt. Do they have some special sauce that others can benefit from? I tend to see Amazon as a leading example of ‘creative destruction’
How about Cisco, Microsoft and Intel. Are they out of paradigm, and if so, how do they get back in the game?
What about Yahoo!, AOL and eBay. No one’s really talking about them. In the Internet bubble hey-day they rivalled Intel, Microsoft and Cisco for valuation. Is their goose cooked? What can they do?

My take: These are the kind of questions people like Eric Schmidt should be asking themselves. First and foremost is the Cashmore social DNA question: “are we out of paradigm? If we are, how do we get back in paradigm without wasting shareholder money?” Microsoft needs to be looking at IBM because they are clearly out of paradigm.