Alphabet Google: The Quest to Diversify Its Revenue

November 26, 2015

Google has been around 15 years, more if you count Backrub. In that time, Google has managed to generate about 95 percent of its revenue from online advertising. I am not to fond of projections, but if one plots the percentage of revenue Google receives from ads and from other sources, the “other sources” are consistently modest. In short, Google has been and remains a one trick revenue pony. I recall that Steve Ballmer, now an owner of an NBA team and veteran of the wonderful Microsoft management training program. Usually I am skeptical of MBAs who jump from high tech to professional sports, but in this case, Mr. Ballmer seems to be correct.

Nevertheless, I read in “Google Aims to Be ‘Cloud Company’ by 2020, Predicts More Revenue from Cloud Platform Than Ads”:

Urs Hölze, Google’s senior vice president of technical infrastructure, predicts that within the next five years, Google’s Cloud Platform revenues could surpass its advertising revenue. “The goal is for us to talk about Google as a cloud company by 2020,” Holze said.

Let’s see. It is Monday. What companies this week have informed me directly or indirectly that each will generate lots of revenue from the cloud? Answer: Amazon, IBM, and a handful of other outfits. Oh, right Microsoft.

When it comes to revenue diversification, the proof is in the numbers. When I examine a company’s financials, I take a look at what the company has done over the previous years. For example, when a search vendor like Endeca gets stuck in the $150 million range for several years, I think it is unlikely that Endeca will jump to be a $1.0 billion dollar outfit. Google has a history of being unable to diversify its revenue. Maybe one can interpret a subscription to YouTube as a new revenue stream. I am willing to go along with that, but quite a few outfits want to do the cloud thing.

Google wants to do science projects, solve death, launch Loon balloons, and make Glass into a fashionable product. Talk is easy. Revenue from non ad sources may be a little more difficult.

Stephen E Arnold, November 26, 2015

Written by Stephen E. Arnold · Filed Under Financial, Google, News

Comments

Comments are closed.

Search the site
Subscribe to Beyond Search
Feature archive
News archive

Stephen E. Arnold monitors search, content processing, text mining and related topics from his high-tech nerve center in rural Kentucky. He tries to winnow the goose feathers from the giblets. He works with colleagues worldwide to make this Web log useful to those who want to go "beyond search". Contact him at sa [at] arnoldit.com. His Web site with additional information about search is arnoldit.com.