Google and Cost Control: Work for Its Accountants Ahead
May 3, 2011
In the midst of the Twitter-changes-news information flood, I wanted to document an item I found important and directly related to search. The article that caught my attention was “Google Australia Claims 2010 Financial Loss.” The title is a good one, conveying the key factoid. The numbers reported by ItWire were interesting in themselves:
- Revenue of $151 million Kangaroo bucks
- Loss of $3 million KB
- Tax payments of $7 million KB.
Accountants can turn water into wine and lead into gold. But the point that hit me was:
Google’s biggest local cost was its 434 employees – which soaked up some $111.6 million in the period, meaning their average salary was a whopping $257,000. However, the company also spent a great deal on advertising and promotional expenses — $10.53 million in 2010. Other major expenses included travel and entertainment – which was $7.13 million. he company’s basic profit and loss statement only listed tax costs of $1.1 million, although the company was actually slated to pay some $7.4 million in taxes in 2010. However it balanced that figure out with deferred tax payments and adjustments. At the end of the year, Google Australia was holding some $21.3 million in cash and cash, as well as $34.2 million of what it said were ‘trade and other receivables’. It had some $16.1 million worth of property, plant and equipment.
Yep, costs. Employee costs are hefty, but the Google is spending for advertising and promotion. Isn’t Google one of the world’s most recognized brands? Isn’t Google the owner of the most potent online advertising system in the world?
So, the key to the future of Google is not just good accounting. Good old fashioned cost controls are going to be the key to the company’s success in Australia and elsewhere. Outfits like Facebook want to slam on the Google advertising revenue brakes if possible. If ad revenue softens, costs loom even larger than they do at this time. Even accountants run out of angles when the revenue flags.
Stephen E Arnold, May 3, 2011
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