Google isn’t often associated with the word failure. Founded in 1998 with an initial investment of $100k, it is now the fourth largest company in the world with a market cap of over $1.5 trillion. Its very name became a ubiquitous verb meaning to seek out information. By every standard imaginable, Google is a success.
However, the road to success for any business or startup is often fraught with failures along the way. New ideas, products, or innovations – no matter how revolutionary or game-changing – may not always find an audience or consumer. Google is no exception to this rule. Over the last few decades, it has spent billions of dollars on hundreds of failed services and products.
Google understands this well and has built its success on learning from its mistakes, largely because it can afford to. So then, what lessons can be learned from Google’s latest failure, Stadia?
Stadia: Google’s Foray into the Gaming Market
Stadia is a cloud-gaming service and game development studio launched by Google in 2019. It was supposed to revolutionize video game streaming in the same way that Netflix revolutionized streaming movies and TV. Stadia allows anyone with a device capable of running Chrome and an internet connection to stream and play virtually any video game. No longer did one need an expensive gaming PC or a gaming console like an Xbox or PlayStation.
But Stadia struggled from the start, repeatedly failing to meet target user counts. In early 2021, Google shut down the game development portion of Stadia. Instead, Google would shift focus to publishing games by third parties. A shift that also changed Stadia’s target consumers from gamers to other game developers. But the shift in focus was in vain, and in late 2022, Google announced the full abandonment of Stadia effective January 2023.
Lesson 1: Commit
The video game industry will make a staggering $220 billion in revenue this year alone, more than film and TV combined. And video game revenue is expected to nearly triple by 2030. It’s no wonder Google wanted a share of the pie.
Google’s initial hope with Stadia’s game studio was that gamers would eventually play Google-created games. But creating quality games takes time, years in most cases. It also takes a lot of money, sometimes hundreds of millions. For example, Elden Ring, one of the more recent major games released, took over 4 years to make at a cost of over $200 million, not including another nearly $150 million in marketing. And it doesn’t even crack the top ten most expensive games in the last decade.
Yet, Google shut down its gaming studio just over a year after it began. This is despite a multi-year commitment to the studio, as reported by former employees. The announcement also came as a surprise considering that an email sent five days prior, by Google Vice-President and project head Phil Harrison, praising the team and generally optimistic for the future.
But before the announced shutdown, Google’s rival, Microsoft, purchased Bethesda, a gaming studio, for $7.5 billion. The purchase led many to speculate that Google was perhaps unaware of how expensive capturing a share of the market would be and was now unwilling to pay the price. Alex Hutchinson, a former Stadia developer, certainly believed that saying, “I think [Google] realized that content is scary and risky and expensive and takes lots of trust in people, and it just wasn’t their core business.”
Google can certainly afford to spend millions testing a market before realizing it isn’t worth the costs. Most companies do not have that luxury and won’t survive the results of a half-committed effort.
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Lesson 2: Manage opposing cultures
Google regularly ranks as one of the best places to work, with its work culture praised by current and former employees. There is a reason nearly three million people apply to work there a year. However, Google’s strength is in its analytical style of management, with workflows often heavily regimented.
In contrast, making a video game, while there is undoubtedly a technical component, is largely a creative art. It is messy, organic, and rarely follows the initial roadmap. According to former employees, this difference in styles created culture clashes between Google execs and developers, to the detriment of Stadia.
For example, there were differing opinions between execs and developers concerning who to hire for development teams. This led to the hiring process taking between six and nine months. By comparison, according to a study by LinkedIn, the industry with the longest hiring process was engineering at 49 days.
Clashes also manifested in Google’s reluctance to support the technical needs of the developers. On numerous occasions, according to former employees, Google denied the use of certain game development software with no other explanation other than “security reasons.”
Google’s unwillingness to alter its analytical management style and the subsequent detriment to Stadia should be a cautionary tale.
Lesson 3: Know when to slow down
If Microsoft’s acquisition of Bethesda for $7.5 billion was enough to spook Google into retreating, perhaps it was smart to cut their losses when they did. Microsoft later purchased another gaming studio, Activision Blizzard, makers of World of Warcraft, for $68 billion.
One of the most important lessons for smaller companies might be that it is acceptable to cut your losses and scrap a project if it becomes a dangerous financial drain to an organization. It’s easy to fall into a sunk-cost fallacy, thinking only of the investment already put in rather than the cost of continuing, when the latter is often more important. Google’s success is precisely because it continually employs this lesson.
Conclusion
Several lessons can be learned from Google’s failure with Stadia. For many organizations, the takeaway is to understand the culture and process of a new endeavor before jumping in headfirst. For others, it is not being afraid to abandon an unsuccessful project before it bankrupts your company.
In every failed product, service, or innovation is the promise of learning how to do something better. As the great innovator Henry Ford said, “The only real mistake is the one from which we learn nothing.”
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