Earnings and Google
October 17, 2014
I read the dead tree version of “analysts Ask What’s Next for Google.” You can find the write up in the New York Times in section B, page 1 and 2 of the October 17, 2014 edition. You may find the story online at this link but no promises. (As you can see, I am indifferent to Google’s rules for linking. Too bad.)
In the write up, there were two quotes to note. I invite you, gentle reader, to consider each carefully:
- “The thing that worries investors, though, is that the company’s golden goose—its search engine—is showing signs of age.”
- “Google executives grow annoyed with analysts’ fixation on clicks and cost per click.”
The first quote seems to indicate a growing realization that Google’s core technology is more than 15 years young. The innovations are mostly wrapper code and tweaks that generate more money for Google. Keep in mind that the vaunted business model is pretty much what GoTo/Overture/Yahoo had and did not leverage. We have, therefore, a bit of Clever, some voting, and the PageRank method disclosed in a patent held by Stanford University. The innovation engine at Google has been to graft GoTo/Overture/Yahoo with a bit of Oingo (Applied Semantics) and ignite the race to be number one on a page of Google results. Ta da. A business model that works. Keep in mind that Google is, as Steve Ballmer said, before he bought a basketball team, a “one trick pony.” A monoculture of money with an ageing DNA. Eeek.
The second quote shows what happens when a non math club member questions the appropriateness of the math club’s penchant for doing mathy things. In my high school math club, we fooled with machine readable tests, hid books in the library, and dodged confrontations with football players who did not enjoy our sense of humor. Think of it. Google is annoyed with analysts. Don’t those folks have an influence on institutional investors and others with big piles of money to invest? In my math club, we were quite arrogant when the principal attempted to reign in our antics. I can report that the principal put the brakes on our mathy antics. Nevertheless, we were incensed. A mere non math person was poking his nose into our Euler crankcase. Bah.
Google faces several challenges:
First, it has to find a way to generate more money because the company is spending lots and lots of money. Spending is okay as long as there is a payback. Spending to buy balloons, barges, and a solution to death is noteworthy. Pumping bucks into infrastructure is like feeding a youth soccer team at Pizza Hut after a match on a chill autumn day. Fighting legal battles consumes bales of bucks. There are other cost issues, but the GOOG has one source of revenue…after 13 years of trying to generate other revenue streams.
Second, search remains important. Search systems that return results that are not useful face some headwinds. In my view, Google’s precision and recall leave something to be desired. Google forces me to search silos of information within the Google empire to get a reasonable comprehensive view of what Google has indexed. Really useful information like “date indexed” and explicit easy access to book and scholarly content would be a plus. Right now, when I search Google, I see the fruits of much labor in the advertising functions. The relevant results function seems to have been kicked to the side of the information highway.
Third, Google’s enterprise search system has fallen behind the search service available on Amazon Web services. Google tried to disintermediate the information technology professional in an organization. Now, Google has an expensive system that is a lot of work to make useful to the annoyingly youthful users in an organization. In 2002, I figured Google would own enterprise search. Well, that hasn’t worked out. That market should have been a slam dunk for the Google. We do have Google Glass, however.
Google faces some “interesting” challenges. I am confident the math club approach is correct. After all, who cares what an annoying principal or non mathy person thinks?
Stephen E Arnold, October 17, 2014
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[…] response to that, Stephen Arnold, a tech and financial analyst with over 30 years of experience, writes, “The innovations are mostly wrapper code and tweaks that generate more money for Google. […]
[…] response to that, Stephen Arnold, a tech and financial analyst with over 30 years of experience, writes, “The innovations are mostly wrapper code and tweaks that generate more money for Google. Keep in […]
[…] response to that, Stephen Arnold, a tech and financial analyst with over 30 years of experience, writes, “The innovations are mostly wrapper code and tweaks that generate more money for Google. Keep in […]