Google Shareholders Not Impressed With 27% Growth

Google logoGoogle has seen its revenue increase by 27% for the final quarter, and 29% overall for 2011. However, this increase in revenue has still fallen short of shareholder expectations and as a result many people are selling. Google share price has dropped by 10% after the results were released, plummeting share price to $575 per share.

However, shares have already bounced back, and are currently trading at $639.57 (Jan 20, 6:42AM EST).

Some analysts fear that Google is investing too heavily in new areas of its business which is reducing the overall profits it gains from its advertising and search marketing business. Although Google has many products and services, its core business is still in placing adverts on its search engine. This is how it generates its revenue and it is this money that is reinvested back into new projects.

This year Google launched its Google+ Social Network and is determined to make it work – all staff bonuses will be partly determined based on the success (or failure) of its social network. Google recognises that in recent years the “web portal” has returned, i.e. Facebook.

In the earlier days of the Internet people would make a portal site, such as Yahoo!, their homepage and start their daily web searching and surfing from there. Then Google search came along and people chose to start their web journey with a blank screen and a search box. However, nowadays people go direct to Facebook or Twitter to see what their friends and acquaintances are talking about online, and Google has been left out of the picture. This is why it is now resolved to build a social network that can rival Facebook.

Of course, all this costs money. In the last year Google has been hiring more staff to help drive forward its other enterprises, such as its Chrome operating system and browser, as well as Google+, and this has resulted in Google’s costs rising by 54%.

Google hired an additional 1900 people during the first quarter and plans to hire another 6000 people this year. In recent years many people have criticised Google for its lack of customer support, and many new jobs have been creating in client facing teams. Google is working more closely with web advertising agencies and web publishers, by organising events and sending Googlers (Google employees) out into the field to spend time learning from the people who essentially keep the Internet alive. This of course is much more costly than the old approach of communicating via forums when time permits!

Android

Google also firmly believes that the future of the Internet is in mobile technology. As more people buy smartphones and tablets, more searches are being done on mobile devices. This opens a whole new world of opportunities for advertisers, and Google is determined to not only be in control of the mobile operating systems (Android) but also to ensure it maintains its market share in advertising as more people leave the PC based websites to spend more on advertising on mobile.

It is possible that in years to come the traditional PC advertising will wane away in much the same way that print advertising has decline in the last decade. Mobile, many people believe, is the future. The days of people sitting hunched over an computer or laptop are numbered.

Last year Google did announce that there is a tough year ahead and that some changes in the pipeline are vital for long term growth and may impact on short term profits. Shareholders were warned in early 2011, so mustn’t grumble really. Google is still the top tech stock and is positioning itself for the future rather than simply maximising profits today.

When Larry Page took over the role as CEO, Steven Levy, the author of In The Plex: How Google Thinks, Works, and Shapes Our Lives, predicted that,

“We’ll see audacious new products, particularly when other people think it’ll be difficult or even impossible — it’s not always about what people need right now, but what people need in 10 years.”

Investment for the future is paramount. Early in 2011 investors were concerned about the rise of Facebook, saying the Google will be left behind. In the last year Google has steamed ahead with its own social media platform and made big moves in the mobile internet arena too.

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