Google shrugs off economy and sets bar for rivals
By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
What weak economy? Google’s second-quarter revenue and earnings both jumped more than a third year-on-year. Android, Google’s surging mobile platform, is picking up 550,000 customers daily. And a suddenly thriving social network is a warning shot for competitors.
Critics have always claimed that Google is a one-trick pony dependent on advertising sales, that it wastes capital on wacky projects, and that arrogant managers have little concern for shareholders. The first part has some validity, but it’s not such a weakness when ad sales grow briskly even in a traditionally weak second quarter. Meanwhile Larry Page, the chief executive, patiently answered investor questions on Thursday and was at pains to point out that Google is a careful shepherd of investor capital, pouring most of its efforts and cash into strongholds like search rather than ideas like driverless cars.
Moreover, Page pointed out that popularity often arrives before profitability for newer Web businesses. Of course, that’s what all Internet companies like to point out when revenue is slow in coming. But there is an element of truth in it, as Facebook’s now rapidly rising revenue and Google’s early history illustrate.
So the company’s shareholders may have extra reasons for optimism — and its rivals reasons to be fearful. Android is on its way to being the dominant operating system for smartphones. And Google’s new social network, Google+, is picking up steam at an astonishing rate. Launched a little over two weeks ago, it now has more than 10 million members. That’s a rounding error compared to the 750 million using Facebook and only a fraction of the Twitter user base. But a month or two more of exponential growth might up-end investors’ assumptions about the value of Google’s two rivals.
Yet Google can’t afford to become complacent. Storms are brewing in Washington and Brussels over the company’s dominance in Internet advertising and potentially in mobile operating systems. Google’s muscle-flexing earnings may inspire fear in rivals, but the company doesn’t want too much loathing among regulators.