One year into the second coming of Larry Page, a lot has changed but one thing hasn’t: Google is still making boatloads of money off its core search product and still having to face questions about whether or not it is really prepared for its world to take a mobile turn.
By the numbers, Page and Co. did well during the first quarter of 2012: revenue and earnings were up sharply. The most interesting thing that emerged from Google’s first-quarter earnings announcement was a stock split that’s not exactly a stock split: Google has proposed the creation of a new class of non-voting stock that will double the number of shares held by shareholders without diluting the number of people who actually get to vote on the future of Google.
In some ways, it’s classic Google: an unconventional solution to a conventional problem that big public companies with high, slow-growing stock prices can face. The nature of the split means that Google’s top executives: Chairman Eric Schmidt, co-founder Sergey Brin, and Page — will retain control of Google for years to come, rather than seeing their stakes in the company dilute over time as new shares are issued through acquisitions and other shares change hands. So it throws investors a bone while ensuring that Google will always be a Page and Brin production.
But on a conference call following the earnings release, financial analysts were mostly concerned about Google’s ability to make the transition from a desktop-oriented world to a mobile-oriented world and Google+ usage than the stock announcement. (See Janko’s take on the Google+ discussion.)
As desktop PC growth slows amid a transition to mobile, investors are a little worried about two straight quarters of declines in Google’s cost-per-click metric: the amount that Google advertisers are paying the company per user click on their ads. Chief Financial Officer Patrick Pichette urged analysts to stop worrying about this metric. ”Our business is healthy,” he said.
In many ways, Google is well prepared for this shift. It (more or less) controls the marketshare leading mobile operating system, and “we don’t get many new operating systems, there’s only been a few in my lifetime,” Page said. Its share of mobile searches is even higher than its share of desktop searches, although we’re still in the very early days of mobile search habits.
Obviously, however, there is a lot of debate as to how much money Google is actually making from its mobile efforts.
Without revealing any new numbers, Page felt compelled to point out that he expects the cost-per-click figure on mobile ads to be larger than what advertisers pay for clicks on traditional Google ads, given that mobile allows for so many other possibilities like location-based advertising and integration with mobile wallets. “We’re where search was in 2002 or 2003,” Pichette said, referring to the maturity and sophistication of the mobile opportunity.
And Page continued Google’s pattern of dropping clues about its mobile strategy in hinting that Google will likely launch a low-cost Android tablet later this summer, saying “we believe there is going to be a lot of success at the lower-end of the market.” Android may be a smartphone powerhouse but it is an afterthought in the tablet market, which is hurting sales of PCs and changing the way people interact with Google products.
Google is a young company by most measures, but it has been fielding questions about its plans for a post-search world for a very long time. The conversation surrounding the company is still not based on what it continues to do well — search — but around whether or not it can successfully grow into the future if search becomes a less important part of our computing experience.
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