There’s no doubt that the error by R.R. Donnelley in releasing Google’s results early caused a bit of a storm, but the numbers themselves were always likely to make traders hit ‘sell’. The search leviathan is certainly experiencing some turbulence, as the global economic downturn finds its way up the chain to even the most prestigious and connected of brands. Saying that, the hyper-short-termism of traders and the markets doesn’t really give a proper insight into what’s happening at Google.
Google is a fascinating company the likes of which we have never seen before. In the short term, there may well be a few more not-so-strong earnings reports. Fact: Google doesn’t have diverse income streams so what affects advertisers – large and small – must eventually knock on.
Right now it’s the small businesses that are pulling back as they are really feeling the pinch with cash flow and ‘hit n’ miss’ retail sales. Around 95% of Google's income comes from its advertising services, and while many big brands are maintaining their budgets and are being aggressive to win new customers in the current economic climate, a large proportion of the search engine's advertisers are small businesses who are more exposed. And as they stop spending, or spend less, Google will invariably suffer.
If big brands start cutting ad budgets there could be real problems, but this is unlikely for two reasons: firstly, these brands are feeling the effects of the recession and are competing harder to keep afloat; and secondly, search marketing works and it’s easily measurable — and big brands like nothing more than measurability.
In the medium term, Google has some tricky obstacles to overcome, notably that everybody is expecting a revenue explosion from mobile. Google is expected to be in the vanguard of the companies monetising mobile and there’s no doubt that if it isn’t, it could well be usurped, albeit temporarily. The advertising and investor dollars may go elsewhere for a while, but I can’t see that they’ll stay away for long. Google has too much going for it.
One of the things Google has been criticised for is too many competing objectives and projects, and here the biggest concern is Facebook. In actual fact Google doesn’t need to compete with Facebook and shouldn’t be trying: it has a successful business model and the potential to move into several new markets while Facebook has a fraction of the earnings and no definite method to make money or improve its abysmal share price. But if Google focuses too much on its competitor rather than its own business goals it could go wayward.
Look at Apple for a recent and relevant example: Apple focused too much on Google as a competitor and released its own Maps a year prematurely - hence all the reported glitches with the app, but it didn’t need to do this at all. In Apple’s main markets, Google isn’t a competitor, and in any case the computer and phones giant should have concentrated on its own customers.
Longer term Google is extremely well positioned to capitalise on the investments it has made in huge data processing facilities and other technologies, and these can be applied to several potential areas of new growth. There should be no doubt that Google has the big aims and the capability to fulfil them.
Google is already a top three global brand, but that’s not what we’re talking about. Google has the potential to change the world more than it has already, and more than its predecessors ever did. Whether it’s tying all its services into one ‘Google,’ or providing efficient power or internet for everyone, or augmented reality, Google is on track, one way or the other, to be a required service for the whole population of earth in the next decade or so.
I’ve no doubt that if Google can navigate the murky waters of the next couple of years with vision and focus, it has a shot at something no other company has ever achieved. At worst it will be the next IBM or Microsoft, at best it could be the biggest and most influential business and brand ever.
Gary Buchan is director of digital marketing agency Render Positive