Google 2011 Results Show Growth, But Can Tech Giant Thrive in Long Run?
‘Tis the season for large technology companies to announce their results for the end of 2011, and last night it was Google’s turn, along with other behemoths Microsoft, Intel and IBM. With expectations lofty, Google’s performance was found lacking by investors, who sent the stock down nearly 10 percent after the company reported that while revenues grew, the prices it was able to charge for advertising had declined about 8 percent.
In absolute terms, these were hardly problematic results. after all, Google did generate more than $8 billion in revenue for the last three months of 2011, which was a substantial increase from the $6 billion it generated a year earlier, along with $2.7 billion in revenue—in three months. Growing that much when the growth of the United States and Europe was barely 2 percent is hardly cause for alarm. Bringing in more revenue than most African governments is hardly reason to carp. If anything, it is cause to observe yet again just how privileged companies are in the global economy, able to generate growth that is the envy of most people and any country. And Google along with its technology peers rake in billions in profits with nary a protester in Silicon Valley decrying the inequity. Banks get opprobrium. Apple executives, Groupon founders and Google visionaries get lauded.
Yet Google’s results and the sharply negative reaction speak to the nature of techland. Google has been so dominant a player that it is easy to forget that it nonetheless operates in a fluid, dynamic, and challenging ecosystem that has little regard for the leaders of yesterday and can see even a dominant franchise erode in a heartbeat. Google has become a verb, but so did Xerox, and that didn’t save the latter from shrinking almost to the point of extinction.
Google has one primary source of revenue: search ads. its algorithms and dominance in search catapulted the company to success more than a decade ago, and buried what appeared to be formidable rivals for the same ad revenue—Yahoo, AOL, Lycos, Excite, to name a few. Some of those survived, some didn’t; none captured the share of the multi-billion-dollar search ad market as Google did and still does.
Google’s European headquarters are pictured in Dublin, Ireland, on November 19, 2010. The Irish government is determined that any financial deal with International financial experts will not require compromise on Ireland’s long-cherished 12.5-percent rate of corporation tax. The tax has helped to encourage companies to re-locate to the republic, but EU heavyweights such as Germany claim the tax gives Ireland an unfair advantage and are expected to demand the rate be raised as part of any deal., Peter Muhly / Getty Images
Microsoft has been fielding these questions for about twice as long as Google has existed, and it too reported its results last night to greater acclaim. Microsoft has become the Rodney Dangerfield of tech giants, successful but lacking in respect. it is nothing if not a proverbial cash cow, with its Windows platform and Enterprise services dominating business and PCs, and even with the waning of the PC and the rise of mobile, Microsoft has never ceased to amass dollars. Now, after a decade of seeming to have the innovation crown claimed by Apple, Microsoft is showing some signs of defining the future with its new mobile operating system and a host of other offerings.
Doing what it does best in essence increases the possibility of Google’s own eclipse.
Apple is rare example of an Internet-age company that reversed a vertiginous decline when Steve Jobs returned in 1997, but the crucial difference with Google is that Apple makes hardware, which even in an accelerated era still requires physical effort, actual factories and certain barriers to entry. Google makes nothing tangible, though its software and formulas and services have substantial value and real demand. its rise to become one of the world’s largest and most influential companies happened in a decade, and the downside of that upside is that it could be eclipsed in the next decade if it cannot find a next source of revenue.
Google must be mindful lest it become a present-day King Croesus, that monarch of the ancients who had all the wealth in the world but ended up a prisoner of a Persian king and watched as his own empire crumbled. “Count no man happy until he is dead,” was the lesson of his reign. Google has unlocked untold information and allowed billions to access the lexicon of human knowledge. Whether it will be around to celebrate the fruits of its achievements in decades to come—that remains to be seen.
