Google sheds one-trick search pony rap

Google sheds one-trick search pony rap

Summary: Google's strong third quarter report and ensuing conference call went a long way toward portraying the company as a three-headed growth monster with search, display ads and Android.

TOPICS: Android, Browser, Google

Google's strong third quarter report and ensuing conference call went a long way toward portraying the company as a three-headed growth monster.

The overarching theme: Google is more than paid search. It's a large display ad player and a force on the mobile front. Google's quarter topped estimates on both the top and bottom lines, but the real enthusiasm this morning revolves around display and mobile (Techmeme, statement, ZDNet coverage).

On a the earnings conference call, Jonathan Rosenberg, Google's senior vice president of product development, delivered the wind up to the sea change in the company's revenue streams. "In these emerging businesses, you guys basically have to invoke your Jedi guesstimation skills to try to figure out what's going on. I hope to shed a bit more light on these businesses with some numbers that we've not shared before," said Rosenberg.

And then came the pitches. Among them:

  • Display and mobile ads now account for 6 percent of net revenue.
  • Display ad annual revenue run rate is $2.5 billion.
  • YouTube is monetizing 2 billion page views a week, up 50 percent from a year ago. Executives were coy about YouTube profits, but the unit is clearly closer to where it needs to be.
  • Mobile is clocking an annual revenue run rate of $1 billion a year.

Jefferies analyst Youssef Squali said the additional disclosure is "no longer a one-trick pony."

Android stole the conference call show. Google CEO Eric Schmidt was asked a lot about Android. Schmidt said:

One way to think about Android is that it's probably the largest single platform play available in the market today. Because it's a platform for computation, for location, for everything that you can do with the new and most popular set of computing devices that are emerging. That market is larger than the PC market. The tablet market is a small component of it, but an important part of it. So if you think of mobile as platform -- as phone plus tablet plus all the other things, we hope to become the leading platform in that space.

Schmidt then went into the cycle of open source, Android usage, mobile search and additional revenue. Schmidt was previously quoted as saying that Google could make $10 from each Android phone.

On that basis alone, Android is hugely profitable. And we maintain the anti-fragmentation and other things by a series of contracts around the store and so forth and so on. So, Android is likely to be financially successful to Google without even any of the applications that are possible.

So (CFO Patrick Pichette) calls up and says, okay, what else can you do for us? And the answer, of course, is that we can layer on value-added services, which is how you get to the $10 (per device). And the value-added services could be of any kind.

Add it up and Google gave folks something other than paid search to talk about. Deutsche Bank analyst Jeetil Patel sums up what has changed:

There has been an overhang on the Google story for continually investing in product development and focusing largely on paid search as a business model. The criticism and concern has been loud and clear from the markets surrounding paid search as the sole business model. However, for the first time ever, the company addressed investor concerns with a rough sketch of the non paid search business lines. While we knew there was tremendous momentum in the world of mobile (more specifically the Android O/S) and display advertising (DoubleClick Exchange and YouTube/video), it now appears Google has clearly become a three-headed monster (given the commentary last night), in terms of paid search via desktop Internet, display advertising as well as advertising in the rapidly-growing smartphone world.

Speaking of smartphones, CEO Eric Schmidt noted that Android is profitable without apps. If Google can turn on the app ad revenue stream, there's real mojo there.

However, there is still work to do. Analysts would like to see even more diversification from Google. Piper Jaffray Gene Munster said in a research note:

We believe longer term pressure is mounting for Google to introduce new, meaningful product to provide a sustainable ~15-20% growth rate beyond 2011.

But Google is off to a good start shedding that one-trick pony rap.

Topics: Android, Browser, Google

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  • RE: Google sheds one-trick search pony rap

    I feel better about myself knowing I block Google's ads.
    Loverock Davidson
    • Then you should feel only half better

      @Loverock Davidson <br><br>unless you're also blocking other ads, of course. And even then...
      OS Reload
    • Thank you, Captain Obvious

      @Loverock Davidson
      You feel better about yourself doing anything anti-Google.
      • RE: Google sheds one-trick search pony rap


        As well he should.

        (Although his spouting off on this site with his consistently inane comments doesn't help his credibility much.)
        x I'm tc
      • RE: Google sheds one-trick search pony rap

        To tell you the truth, I have nothing ageist Google. They are a corporation just like any other.
    • haha.... meanwhile, apparently Google's still getting PAID! haha..

      @Loverock Davidson You are hilarious, I got to admit. One of the more entertaining posters on ZDNet. Of course you do realize that if you're blocking ads, there's no way to really (or at least easily) discriminate Google's ads from other ads (like those from Microsoft). So you're actually not helping or hurting either one of them! lol..... ;)
      • RE: Google sheds one-trick search pony rap

        @i2fun@... exactly. It's no use dude. He'll never get it.
    • RE: Google sheds one-trick search pony rap

      @Loverock Davidson

      Google is not concerned about what you do. They will keep on making tons of money.
    • RE: Google sheds one-trick search pony rap

      @Loverock Davidson

      For once I will agree with you . . . as far as you go. Since Google makes their money by spying on their users, you need to avoid all Google apps and services, and use NoScript to block Google scripts on many web pages. Google is the biggest spyware distributor in the world. Nothing they provide is "free".
  • They've allways been Search and advertising

    two ponies, that's it.

    And to be up 32% from last year? Not hard given that advertising dropped across the board the last two years, so anyone who makes their money from advertising has seen an increase the past 12 months.
    John Zern
    • However you want to slice it, however many ponies you want to call it.

      Google is surging and Microsoft is on a long painful slide into oblivion. Microsoft's Win32 and Office ponies are getting old and fat.
      • One of those is true

        The 32 bit version of Windows is sliding into oblivion. The 64 bit version, though? Not so much. And Office still is a market leader.
        Michael Alan Goff
      • Win64 is just Win32 re-compiled for 64 bits, still the same basically what

        was introduced for Win3.1. Locally installed office suites for formatting on 8.5x11 paper are on the way out. Think publish and share online.
      • You obviously know nothing about Windows

        if you really think what you posted is in any way true.
        Michael Alan Goff
      • goff256: You obviously need a little history lesson, and your lack of any

        argument in your post shows you have no clue.<br><br>The Win32 and office file format ponies are getting old and fat and looking even more ridiculous than the short fat bald guy still trying to ride them.
      • I said I can agree with you on Win32

        But Office is, has been, and will be the industry standard for a long time. What will displace them? OpenOffice? LibreOffice? iWorks? Sloppy, sloppy, and available on less than 10% of the market. There isn't a viable competitor.
        Michael Alan Goff
      • goff256: locally installed office suites for printing on 8.5x11 is also on

        the way out. We are moving rapidly to sharing and publishing online, and for publishing and sharing online, MS Office not in anyway useful. The baroque features of MS Office are looking more ridiculous every day. That said, OpenOffice is also on the way out too, but, a great transition tool for being able to read those few .doc and .docx attachments we still get.
      • Really...?

        @goff256<br>If Office is the leader, then how come it's suddenly finds the small little tiny OpenOffice a threat?
      • You didn't answer me, Donnie

        Who is taking over?

        As for Zc... I don't think they actually see them as a threat. Anyone with a brain knows that OOo is not a threat to anyone at all.
        Michael Alan Goff
      • RE: Google sheds one-trick search pony rap

        @DonnieBoy Yet another sad and tired - and always wrong - prediction. Change the channel this one is old and tired...much like yourself it sounds like.