There's been a round of blog sparring about the state of Google, with ReadWriteWeb's Bernard Lunn claiming that they're spreading themselves too thin, and Tim O'Reilly firing back a defense that they're making strong strategic moves. I think they're both wrong.
Microsoft terrified people in the 90's because once they moved into a market they would carpet-bomb their way to dominance, using their deep pockets and distribution with the OS to crush competitors with feature-rich applications. Once they'd won, the products would often fester, but while there was still a race they would keep improving with every release. Look at Internet Explorer vs Netscape for the classic pattern. IE 3 was awful, IE 5 was pretty darn good for its time and killed Navigator. Then nothing much happened for years until Firefox came along and goaded MS into doing good things with versions 6 and 7.
Google's moved into several major markets, come out with an excellent initial product, and then left it mostly unchanged. Look at Gmail, which I track obsessively because I think they did such a good job at launch, and I keep expecting them to follow up with some mind-blowing innovations. Instead the recent Labs section mostly contains UI tweaks. Google Documents is the same, a great launch but years later there's still the same bugs and limitations I expected to get fixed quickly. Blogger is stagnating too, I could go on. In almost every major area Google has expanded into outside search, they've implemented or bought a great initial product, and then neglected it.
Unlike Bernard I don't think it's inherently a problem that they're spread so widely. Microsoft in its prime showed that it's possible to win a lot of independent markets simultaneously. Google just can't seem to execute on their strategy. And unlike Tim, I think you can't say they've got a strong strategy and ignore their operational track record. Strategy is useless without execution. Aiming to catalog the world's information is a great strategy. Building an open-source smart phone OS is a clever move as part of that. The trouble is that the implementation isn't looking great. Android already alienated a lot of developers before a single phone was been released, and they won't be supporting ActiveSync amongst other things.
Google have produced amazing innovations for years. I'm just hoping they can keep their incredible momentum going, and capitalize on their initial releases by pushing the products forward. If they don't, Zoho may not have millions of customers today, but there's a lot fewer barriers to switching in the web world than there ever was on the desktop.