I’m not really a stock market betting guy. It’s a game I’ve never been good at and frankly doesn’t interest me. I do keep an eye on several stocks, though, and one of them is Google. It’s been a tough year for them, and I’m sure their larger investors are letting them have it at their current shareholders meeting. The problem is that they have been more or less flat, showing a 1% decline in a period where the S&P 500 has hit nearly 10% growth.
I have extensively documented the factors driving these doldrums. The rapid move to mobile by users when advertisers have been slower to follow has hurt them. They have swapped desktop dollars for mobile pennies in many categories. The irony of that transition will not be lost on newspapers, who suffered a similar calamity a decade or so ago when print dollars became online pennies.
Having conquered search, they went on to miss out on social media. They missed Facebook, Twitter, Snapchat, and a bunch of other upstarts that have been pulling users away from Google properties. They also have a penchant for super expensive, “revenue-free” projects like Google Glass, Fiber, Nest, Driverless cars and Loon. That’s fine and dandy when you are king of the hill and leading the pack, but it’s less cool when you are just another online ad platform. Add to those woes the growth of markets over which they don’t have any sway, like Amazon and eBay. It’s tougher to be a Googler than it was a few years back.
At its core, Google is an advertising platform based around an auction system. The explosion of mobile inventory and the slower rate of adoption by advertisers has driven their click prices down month over month. That will likely improve as the ad world catches up, but it won’t be soon.
They need some game-changing, revenue-rich ideas. To that end, they are moving towards being the marketplace and selling goods and services direct, as opposed to being the forum where advertisers pay to reach the audience. It’s a good idea if they can make it work, but it’s also dangerous as they may end up in competition with their own advertisers.
There is talk of them moving into our local space. The idea is that Google becomes the platform which a local business uses to get jobs, then shares the profit on that job with Google (as opposed to merely buying ads to get customers). It’s huge and potentially game changing. It’s also fraught with friction and would require a fundamental change in how the local economy works.
It’s possible that in spite of having a massive war chest of cash and market leadership in something as fundamental as search, the glory days of Google growth are behind us. If they are, Google stands the risk of being discounted in the same way that newspapers were a decade or so ago. Maybe it is already far too far out, and not waving but drowning.