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Two Interesting Numbers from Google’s Earnings Report




Historically, posts about Google’s earnings call has received little to no interest from our readers. Less people read the posts. I suspect that is because people want to use Google rather than know how much they are making. Oh and unless said they lost money it’s assumed that Google is fine even if ‘The Street’ gets jittery.

Two numbers, however, stuck out for me from the call aside from the $2.3 billion in quarterly profited reported.

First was the rise in operating expenses from $1.84 billion one year ago to $2.84 billion this quarter. Much of that jump is being attributed to the rising cost of keeping employees around and hiring new ones.

From the Wall Street Journal

Sales and marketing costs spiked 69% to over $1 billion as Google spent to build its local-ad business and to promote its Chrome browser.

Google made a 10% across-the-board salary increase, which is driving up expenses this year. The company has also been shelling out money to keep some top product managers from jumping ship to hot start-ups such as Facebook Inc. and Twitter Inc. Google added 1,916 employees since January, bringing its total work force to 26,316.

They must be including all those $100 of free clicks as part of the cost of the marketing for Google because I don’t see it otherwise. This could be an indication as well as to just how costly it will be to get the word out about local at the local level as its Google Places experiments to push the product in cities like Portland, OR, Charlotte, NC, Austin, TX, Las Vegas, NV and others. Otherwise, though I still don’t see Google as a marketing juggernaut.

The other number that jumped off the page (just about quickly as Larry Page came on the earnings and left after just 2 minutes) is the amount of cash that Google has which has reached just under $37 billion. That’s a lot of money folks and I have only one suggestion on how to spend a small portion of it to help Google become a threat again rather than a big search marketing cash cow which is really what it is right now.

Take a billion or two and rather than look to buy a Groupon or a Twitter invest in building a world-class, state of the art and undeniably awesome support structure. I have said this on a million occasions but now it is more evident than ever. Google will make plenty of money off the tech savvy types of the world and as that number grows and eventually becomes the majority of people they will do well.

In the interim, however, there is a 15-20 year period where there will still be people who want to get more from Google but just don’t have the tech chops to do so. These people need help from other people, not forums, FAQ’s and videos. This large market segment could be the difference in Google being dominant until the population shifts to majority of tech savvy folks.

Sure the ongoing costs of maintaining this kind of super support team is a drag on profits but if more people are using Google more effectively there will be more revenue. There will also be more Google customers which may spend more than they ever imagined because they have pent up demand that comes from years of not being able to utilize Google to its fullest benefit.

I say all of this knowing full well that Google will probably never invest in a structure like this. It flies against their automation at all costs mentality. Honestly, though, I really believe that Google needs to do something different or there could be trouble. It’s good to have direction and a mission but to do it at the expense of other great opportunities that require something other than servers and bytes and bits is short sighted.

But, hey, what do I know? Be nice when you answer that. So what are your thoughts on what Google should do with that mountain of cash? Reduce the deficit? Something philanthropic? Nothing at all? Have company outings with pools full of money so they can swim in it?

Let us know!

  • http://luchshee-video.ru/ Online

    Thatks! It is very nice!

  • http://www.magicdust.com.au Aidan

    Nice article, thanks Frank.

    I’m in Oz and I don’t know if Google have to ‘expense’ their AdWords discount vouchers as an operating cost under the accounting regulations in the US (as opposed to it being a lack of gross revenue), any accounting folk comment on that?

    I have however thought on many occassions that Google shoots itself in the foot with those vouchers given to the public…

    While an AdWords manager can (usually) demonstrate value out of a voucher like that, the average Joe gets those things, tries AdWords and blows the $100 on stupid keyword choice to a more stupid landing page, then on seeing ZERO return from the experiment, thinks “well I’m glad that was not my $100, what a waste of advertising dollars”…

    From that point on he is most unlikely to become an AdWords customer and he will tell his friends that too…

    On the few occassions where Joe does carry on the experiment past that voucher stage, and later seeks help to make his now personal spending work better – what support does he get from Google?

    my two cents…

  • http://marketing-blog.catalystemarketing.com/ Linda Buquet

    Another great post Frank.

    Many of us recently posted about Google Places support over at Blumenthals and Jeff Huber the new VP of local read the post. He said he’s listening.

    I said something to the effect that if Google Places would offer support and start fixing the myriad of Google Places problems, they would have TONS of agencies, SEOS and marketers singing their praises and selling their services at NO COST to Google. Forget buying Groupon for their sales team. WE would be promoting Boost and Tags to clients if GP worked and if there was support when it didn’t.

    If Google put the previous HotPot advertising budget into fixing Places and offering some level of support – even priority paid support, they would get 10 times the ROI based on FREE referral and word of mouth advertising from happy customers and consultants.

    And if Google Places worked well, didn’t scrape and change data in verified records, didn’t create dupes and was not such a pain to use – FREE WORD OF MOUTH advertising – the BEST kind of advertising would come from all the happy business owners that had a smooth experience.

    • http://www.localbasix.com Frank Reed

      @Linda – Thanks for the compliment. Honestly, I think that the idea of Google offering genuine support is a pipe dream. They don’t get the human side of business because of scale. Now they have created a monster that working backwards into building a support infrastructure could be almost too big of an undertaking. I really believe that they have made a huge tactical error by being almost antagonistic from a support perspective.

      But if money is needed to get to the point of having real support, very few companies have as much as Google so we’ll just have to wait and see.

      Thanks for stopping by and contributing.

  • M Evers-Hood

    Frank,

    Thanks for the post. They are interesting #s – particularly spending… I’m wondering if you could elaborate more on “Support structure” – what are the capabilities, assets, etc that google isn’t offering that you think is needed?

    Follow ya’ll daily – thanks for the great news/analysis!