Is Google Over?

Fortune’s latest cover story argues that Google “is transitioning from a growth company to-and there is no other way to put it-cash cow” It goes on to say “that ranks up there with being a former super model”

Google clearly has challenges:

  1. Its search business is expected to grow at 15-20 % p.a. instead of the 30-40% growth it enjoyed till recently
  2. Google’s social networking initiatives have failed while Twitter and Facebook are becoming plausible alternatives to search (at least for certain use cases)
  3. Despite making ~ 80 acquisitions (for more than $ 6 B), and entering half a dozen new businesses, Google still makes 99% of its profit from search.

Yet, it may be too early to write Google off. Afterall, search accounts for 3.5 % of time spent online and almost 50% of total online advertising spend. As Google and others figure out how to extract more value from the other 97% time spent online, the pie will continue to grow. And Google has several aces up its sleeve:

  1. Android is now selling 200,000 new phones every day, and has surpassed the iPhone. While Google makes very little revenues from the Android OS today, since the OS is free, over time, the ad revenues could exceed its current search revenues. After all, Google makes more per PC user (via search) than Microsoft does from selling Windows, and there will probably 1 B+ internet connected mobile phones by 2015
  2. YouTube accounts for 10% of all time spent on-line and 43% of all on-line video. And this is the beginning: on-line video consumption is up 100% YoY. A recent comScore press release indicated that 178 M US users watched 30.3 B videos in April 2010(100% growth YoY), and yet these numbers are a fraction of the time spent watching TV. On-line viewership will continue to take share from TV. As that happens, its anyone’s guess how much of the $175B that advertisers spend on TV (WW) will move to on-line video. Given’s Google’s dominance in on-line video, is it beyond the realm of imagination that Google might have a $ 10B + video advertising business by 2015?
  3. Google’s display advertising platform (acquired via the acquisition of DoubleClick, Teracent and Invite Media) is growing at 40% YoY and will probably do $ 1 B in revenues in 2010.

Clearly Google has competition. And thank god for that! But it’s a little early to write it off!

About Ashu

General Partner with Foundation Capital. Areas of interest range from digital media, mobile and internet infrastructure to all things related to India. Currently on the board of TreeHouse, Aspire, Conviva, Agni and TubeMogul.
This entry was posted in Internet, On-Line Advertising. Bookmark the permalink.

2 Responses to Is Google Over?

  1. I don’t know how you would classify gmail advertising? I don’t know if Google breaks out revenue on gmail advertising, probably not, but there’s another example of a new product that Google launched and over time has successfully monetized. They could easily do something similar with Google Docs as well.

    • Ashu says:

      gmail is a good product and there is some monetization. However, in the grand scheme of things, it has not moved the meter for Google. To move the meter for Google, a new product has to do more than $ 1 B in revenues and have the potential to have $ 5 B + in revenues. Video(Youtube) and display advertising have crossed the $ 1 B mark this year and have the potential to exceed $ 5 B in 3 years.

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