I know Google is trying to break out of their traditional business, but it seems like they've been trying to do that for years and nearly all their revenue is still ads.
Just because very smart entrepreneurs are able to capitalize on an opportunity (search) and turn it into one of the world's largest companies, doesn't mean they can arbitrarily do it again.
Has any company the size of Google ever successfully pulled of this sort of diversification? (Honest question, there may well be answers I'm not thinking of. But I do mean very large companies, I know smaller ones diversify all the time successfully (and unsuccessfully).)
For context, you think about a company like Microsoft or Google "diversifying", and, you know, for them it's not enough to "merely" build a $250 million/year business for it to be considered a leg of the metaphorical company stool, instead of just a "hobby". How can you hope to scale up a new core competency to the requisite levels? (It seems "merely" having vast resources is no guarantee of success.)
I know that you thought you were providing a counterexample (which is odd, since I wasn't making some kind of universal claim) but yeah, they are. Branching into groceries represented a pretty bold diversification. I'm pretty sure they've talked about even providing banking services. They're about as diversified as a dedicated brick and mortar retailer can possibly be, and it's not hard to see why: they control their existing niches and they want to continue growing.
I wasn't aiming for a counterexample so much as an illustration of the fact that whether a company is diversified or not is a matter of definition.
Is a company diversified if it operates in related markets in the same sector, like a bank that does retail and business banking? Is a company diversified if operations outside their core business are only a small fraction of their turnover, like an oil company that has a small renewables operation?
If the purpose of diversification is to keep the company afloat if there's a downturn in one market, these properties are important. Being in retail and business banking won't help if the entire banking sector has problems, and 1% of your business won't keep you afloat if the other 99% of your business is sinking.
Intel did something even more drastic: they shuttered the division that was making 90% of the companies revenues (memory chips) and completely pivoted to a new business (microprocessors).
IBM is a great example of reverse diversification. At one time, it looked like taking over the world (buying Rolm etc), but after the crash it has been selling off divisions on a regular basis: PCs, printers, drives etc. These were once considered core businesses.
Um, Apple? Microsoft gets a lot of flack but frankly it has done pretty well. It makes a lot of money in several different divisions outside of windows and office.
Apple has always been a consumer electronics company...they may have a diverse set of consumer electronics, but they aren't truly diveresified. I think a truly diversified company is more like GE, 3M, Samsung, Honda, etc.
I don't think you have to be a conglomerate to have diversified product lines. They were just a PC company for 20 years. Then they added iPod, then iPhone, then iPad. On top of that they have itunes and apps which are by themselves a large growing business. 5 different billion dollar businesses is pretty good.
Google on the other hand has ads. If you want to be generous you can break it out to search and YouTube. Android is obviously huge, but they don't really make money on it. The interesting thing IMO is that they likely would be making more money if they just stayed friendly with Apple. If apple had 80% market share google would be getting far more search traffic.
Just because very smart entrepreneurs are able to capitalize on an opportunity (search) and turn it into one of the world's largest companies, doesn't mean they can arbitrarily do it again.