Was that confidence justified? In Mr Page’s first quarterly results
announcement this week, he revealed that the company has been on a
three-month spending binge.
Growth in operating costs – 54 per cent – was exactly double growth in
revenues, a development that shocked investors into removing 5 per cent from
the share price.
The reaction could be overdone. Sure, there is a good chance that Google will
never again strike it as rich as it did with search-connected advertising.
Replicate successes
It is the same story with Microsoft in software and with Nokia in mobile
telephones: each has spent enormous amounts of money trying – and failing –
to replicate earlier successes.
Google is still growing – paid-for clicks during the quarter rose 18 per cent
compared with last year – but is maturing in its existing markets. It owns
two-thirds of the search market in the US, about 90 per cent in Europe, and
faces antitrust complaints in South Korea.
Maintain growth
Investors should not blame Mr Page for striving to maintain his company’s
meteoric growth and, with $37bn in cash in the bank, he can afford to make
big bets. So the spending will continue.
Google will conduct its largest recruitment drive yet this year and half of
the newbies will not be working on search-related stuff. The company already
has more staff than it strictly needs - it gives its engineers one day off
each week to “do their own thing” - but this is essential for it to have a
chance to remain a growth company.
Google’s hit products have invariably been created when the adults were away.
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