Google Spending a Lot on Social

By Clint Boulton  |  Posted 2011-04-16 Print this article Print

The jury is still out on the Chrome browser/operating system combination; neither have made the company money. But there's no question Android is making bank. Google said last fall mobile ads were operating at a $1 billion run-rate.

Jeff Huber, senior vice president of commerce and local, disclosed some nice mobile metrics for Android on the call, noting that 350,000 Android smartphones are activated daily and that more than 3 billion apps have been installed from the Android Market to date.

Caris and Co.'s Sandeep Aggarwal called Google's Android and mobile ad growth a "phenomenal growth story," and described Google's display advertising and YouTube ramp impressive.

However, with an eye on rising expenses, Aggarwal also said that for every new full-time employee Google is hiring, they are also hiring one contractor. Moreover, disproportionately more time and money are going in social, mobile, local, and display.

"Google's attempts to embed social media into its core offering will take time and will be costly, as the company aims to extend leadership beyond its core search castle," he wrote in a note April 15.

Aggarwal, fresh off of attending 2011 Ad:Tech Conference in San Francisco, has his finger on the social advertising pulse. While the conference has been traditionally dominated by Google's paid search ad ecosystem, he said a Facebook-led social media ecosystem is spawning several product and service companies for social media.

That's a big reason why Page has tied employee bonuses to the company's social networking performance. Google isn't going to "beat" Facebook in terms of building a bigger social network, but it's new +1 button is designed for aggressive monetization when it rolls out to third-party players later this year.

With desktop search and mobile search corralled and the dominant ad share for both, Google merely needs to be a player in social ads to round out its YouTube display ad offerings.

But analysts and investors are less sanguine about this, given Google's spotty track record in social. If Google spends billions to forge a formidable social software war chest it had better do so in way that pads the bottom line.



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