What is Google?

What is Google?

 Google

 Ask the man or woman on the street, and you’ll probably get an answer along the lines of “a search engine”. Ask an investor, and they will see it more as an advertising company.

For most of the Silicon Valley giant’s two-decade history, these twin definitions have been accurate enough. Google processes more than 3.5 billion queries a day on its search engine: two-thirds of the world’s searches via PCs and an even higher proportion on smartphones.

Meanwhile, it makes billions out of these searches. Businesses of all sizes pay top-dollar to have their websites appear in strategic locations on Google’s search results page.

This definition, however, is becoming less fitting by the week. Google may have started out as a search engine project when it was founded at Stanford University in 1996, but it is now a sprawling, all-encompassing internet giant.

For Google is also a mapping service, email provider, video site and smartphone operating system.

It is also investing heavily in some more far-flung ideas: from self-driving cars to renewable energy, to next-generation wearable technology, to internet-connected thermostats. It is taking on big US telecoms groups by building its own broadband networks, and developing balloons that can beam the internet to developing nations. I could go on, having not yet mentioned television, medicine or robotics.

This divergence is exciting for consumers, despite raising a host of privacy issues, but creates something of a headache for investors, who are beginning to ask some big existential questions about Google.

Of the $17.3bn (£11.2bn) the company made in the first quarter of this year, $15.5bn of it was from ads. When nine in every 10 dollars comes from advertising, it’s relatively easy to understand a company – Google gives away products like search, Gmail and Maps, and the consumer pays for it with their personal data, which is turned into advertisements on those same services.

The problem for investors and analysts is that this picture, as we’ve seen, is changing. In the first quarter, advertising revenues were 11pc up year-on-year, but “other revenues” – principally the 30pc cut the company takes when someone using an Android phone or tablet buys an app, film or song – increased by 23pc. 

 

 

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