Google Antitrust Worries, Growth Slowdown Seen as Temporary Setbacks
Ezra Gottheil, principal analyst at Technology Business Research says what is happening to Google is typical for any company that grows as fast as Google and reaches a certain size. “Then you have the law of large numbers. You cannot keep growing at the same high rate,” he said. “As companies get bigger their growth rates tend to slow down and not necessarily because they are executing badly.” Google’s slowing ad revenues and growing acquisition costs are also not very surprising for the same reasons, Gottheil said. “Once you have harvested the most valuable clicks, the next round is going to be less valuable and each additional piece of the market is going to be harder and more expensive to acquire,” he said. “There is a certain amount of diminishing return,” beyond a certain point. Google’s forays into numerous new areas need to be viewed in this context, according to Gottheil. The moves are as much about the company diversifying its revenue stream as they are about enabling more growth of its core businesses. Google’s autonomous cars, for instance, could one day become another platform for targeted ad delivery or another rich source of customer data for marketing purposes. A lot of Google’s business is about connecting people in ways that bypass current infrastructure, he noted. But not all of them will pay off, and if they do, it won’t be for an indefinite period of time, Gottheil said. “The complaint that they are somehow wasting this money suggests it is better that Google with all its great people and all its great resources just give the money back to investors,” he said.The bigger any company gets, and the more diverse its business ventures become, the more complicated things get. But that doesn’t mean Google is struggling in any way, Kagan said. “I don’t see any red flags yet. This is typical for a fast growing company,” he added. “Like many successful businesses, Google is very innovative and has a habit of throwing new stuff against the wall and seeing what sticks. They work on whatever sticks and discard the things that fall to the ground.” Another analyst, Charles King of Pund-IT noted that “since its origin in the late 1990s, Google has been one of the most ambitious and consistently innovative companies in IT.The market has certainly shifted since then, and Google has mostly been successful in adapting to those changes.” By venturing into unproven new markets, Google no doubt has chosen a difficult road, King said. But the strategy is deliberate. Unlike companies that have chosen to specialize in specific technology areas, Google appears to have opted for “informed generalization,” he said. The company’s effort seems to be to investigate and understand the bigger picture, and to strategically add value where it best suits it purposes and goals, King said. “I believe that by taking a wider view of the intersection of technology and daily life than the vast majority of its competitors, Google is poised for a resurgence.”
Independent analyst Jeff Kagan is even more sanguine about Google's prospects, suggesting that Wall Street jitters over Google’s financials are much ado about nothing. “Wall Street has a different measuring stick than the rest of the world. You really can’t judge a company by what investors think,” said Kagan.