Google: Harmless hobbies and hard cash
Thought Google had lost its way? Messing about with robot cars, and other side projects like Wave and Buzz that are a distraction from its core business and are failing to please either consumers or investors? Well look at the search firm's latest financial results and marvel.
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In the last three months Google hauled in over $7bn in revenues, up nearly a quarter on the same period a year before. And of course that cash comes not from driverless cars or building high speed broadband networks across US cities or social networking ventures - it all comes from advertising.
Look at Google's UK revenues - in the last six months they amount to $1.5bn or around £1bn - and work out just how big a player the firm is in the local advertising market less than a decade after its arrival.
By contrast, ITV, earned £728m in advertising revenues in the first six months - a big improvement on last year but still a way behind Google. Online advertising has weathered the recession well and one firm appears better placed than any other to benefit as it accelerates again.
And it's not just the old staple, search ads, which is behind the surge in revenues and profits. Google says it's now earning more than $2.5bn from display advertising and $1bn from mobile.
What's clear is that some areas which looked like a costly diversion are now proving their worth.
Take YouTube for instance, which once looked like a big sink down which Google kept pouring cash.
The other day I got an e-mail offering me a revenue-sharing deal for one of my YouTube videos - it was of Stephen Fry at the Windows Phone 7, giving Microsoft's phone a surprise endorsement. The deal, which I naturally declined, involved a share of revenue from putting adverts next to my video.
But Google says over two billion YouTube videos every week are now part of this advertising programme, providing an increasing flow of cash for both their owners and of course for the search company. Whether or not that makes YouTube profitable is not revealed in the accounts - but Google is hinting strongly that it is there or thereabouts.
Then there is the Android adventure - why spend a fortune developing a mobile phone operating system and then simply hand it over for nothing to manufactures?
Well Google says the idea is that the more smartphones there are out there, the more they will be used for search, and the more advertising that will generate. And with mobile search up 500% after a year in which Android phones have taken the market by storm it's hard to argue with the strategy.
Now there are plenty of Google activities where it is hard to see any contribution to the bottom line. Its engineers are still being allowed time out to work on wacky ideas, many of which quickly fail.
You might think that it is now time for the company to grow up and take life a little more seriously. But as long as it keeps churning out bigger and bigger piles of cash, indulging in a few eccentric hobbies looks like a strategy for success.
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Comment number 1.
At 15th Oct 2010, E6BadBoy wrote:I see their shares are up 10% today...
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Comment number 2.
At 15th Oct 2010, Martin Rigby wrote:Google faces the challenge that all really successful innovation businesses face. Their innovation makes them heroic outsiders at first but, if it's any good at generating competitive advantage, quickly propells them towards becoming a monopoly - and nobody loves a monopoly.
I run an internet music service and the two things that represent best value for marketing spend are SEO (making your site rank higher in search results) and search marketing (paying for all those 'Ads by Goodle' on other sites with relevant content). I feel sorry for all the music publications but advertising with them just can't beat Google for cost of user acquisition.
I can't love a monopoly, but you have to admire a great business!
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Comment number 3.
At 16th Oct 2010, jr4412 wrote:Rory Cellan-Jones.
another infrastructure project they're involved in:
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Comment number 4.
At 16th Oct 2010, MacBookPro wrote:Google is the opposite of Apple. They'll release something not finished and potentially useless, slap "beta" on it, then see what happens. Apple, on the other hand, will take years to polish something before letting anyone even know its name.
Which is better? Well, they're both good for different reasons. As much as I like my polished Apple products, I do like the geeky fun of mucking around with Google's latest invention.
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Comment number 5.
At 16th Oct 2010, Mark Harrison wrote:> Its engineers are still being allowed time out to work on
> wacky ideas, many of which quickly fail.
Indeed, but there are two benefits to this:
1: Google get to massively monetise the 1% of those ideas that DO work, and presumably have them developed at a fraction of the cost of buying competitors for hundreds of millions of dollars.
2: Google are a "destination employer" (to coin a phrase). They pay well, they offer good working conditions, AND they offer the opportunity to pursue interesting projects on the company's time.
Of course, the same was true of Microsoft 15 years ago - whether Google can sustain these two advantages remains to be seen.
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Comment number 6.
At 18th Oct 2010, Matilda M wrote:That's all well and good but I think Google has lost its connection to its users. Only recently they made a change on their google homepage (you can't turn off autosuggestion) that has infuriated millions of users and I have yet to see a response from Google on why they have made this change and how or if they will rectify it. So for now I am not using Google anymore. I do not need Google to give me suggestions what I might want to search for (they are wrong most of the time).
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Comment number 7.
At 20th Oct 2010, jr4412 wrote:Matilda M #6.
"Only recently they made a change on their google homepage (you can't turn off autosuggestion) that has infuriated millions of users and I have yet to see a response from Google on why they have made this change and how or if they will rectify it."
if you were subscribed to the 'Official Google Blog' (issued daily via email) you'd have read "why they have made this change" and why they're not abandoning the autosuggestions.
"I do not need Google to give me suggestions what I might want to search for (they are wrong most of the time)."
like you I do without their suggestions, but find the search results are pretty good. maybe it's more about selecting a good set of search terms and using the tools provided (double quotes, the minus sign for exclusions, site:, and suchlike).
"..I think Google has lost its connection to its users."
there's some truth in that though.
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Comment number 8.
At 20th Oct 2010, Matilda M wrote:@jr4412: thanks for the tip with the google blog, I'll read up on that.
It's not so much what google suggests, I just find it irritating THAT it suggests.
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