What Has Google Been up to Lately?
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For a company that produces a diverse range of technology services, Google's revenue stream is frightfully homogenous: it comes from advertising. Is Google doing anything to change this? Do any of Google's recent moves offer a possibility for diversifying its income?
Some industry analysts have been saying that Google has a problem. It’s hard to believe, given the search engine’s popularity with its users, but it’s true. It’s even harder to believe when you consider that Google’s stock premiered slightly under a year ago for $85 per share and, as of this writing, is trading at around $300 per share; after all, it’s hard to argue with success, and Wall Street rewards success. Even Wall Street has been wrong before, as those of us who remember the dot-com boom and bust learned the hard way.
I spoke briefly about Google’s problem in an article last month covering the would-be class action lawsuit against the search engine giant filed by Click Defense. Click Defense, an online marketing company that helps firms determine whether they have become the victims of click fraud, has been accused of using the suit as a publicity stunt. I’m ambivalent about Click Defense’s possible motives for the lawsuit, but at the same time, it does raise certain points that can’t be ignored.
Google’s revenues last year came to more than $3 billion. About 99 percent of that came from advertising. That’s a pretty tightly focused revenue stream; so tight, in fact, that it should make Google’s stockholders a little nervous. Through a combination of in-house expertise and carefully-made purchases, the company has diversified its technology and services, branching out into news groups, email, blogs, photo sharing, specialized searches (Froogle, satellite maps), and other areas that might not seem directly related to search. But it has not diversified its sources of income.
For many companies, after they have been around for a while, it can be a good thing to diversify. It gives them an element of security if one revenue stream begins to dry up. If advertisers become unhappy and take their dollars elsewhere – and admittedly unlikely but still possible scenario – Google could find itself out in the cold. Surely the powers that be at Google are aware of this problem; after all, they’re stockholders too. So the question is, what is Google doing about it?
Next: Google on the Move >>
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