Googles first-quarter 2012 earnings call was notable for both what executives shared and didnt say. In addition to announcing a two-for-one stock split, $10.7 billion in revenue for the quarter and a cash pile totaling nearly $50 billion, there was much talk of the value of clicks and developments in search. With 850,000 Android devices being activated each day, its easy to forget that advertising and clicks are Googles primary businesses. However, Android plays an increasingly starring role in both.
CEO Larry Page emphasized his and co-founder Sergey Brins personal investments in Google, their enduring love for the company, their impatience to make it a company that does important things in the world and the necessity of taking a long-term view to achieve this objective. Below are four more notable points that Page and company touched on during the hour-long call.
1. Searches are going to continue to become more sophisticated, helped by social features like Google+.
Privacy concerns hover over much of what Google doesamid some controversy, it recently updated its privacy policyas personal information is key to Googles ability to improve itself.
When asked about Googles investments in Google+, and whether the company with the best social signal would be able to offer the best search capabilities, Pageas he did in a recent 2012 Update posted to Googles Investor Relations pagegave the example of searching for his friend Ben Smith. Google searching, he explained, has advanced to where it knows enough about a user to understand which Ben Smith, for example, is being searched for, despite the fairly common name.
Having real feedback from users about what they like and dont like and things theyre sharing and so on is very useful for search. We have a lot of those signals already, but we can always use more ¦, said Page, according to a transcript from Seeking Alpha. I think search is going to change a lot. Were going to make it a lot better over the next five or 10 years, just as its changed a lot in the past. And it will include a bunch of those signals and a bunch of other things as well.
2. As mobile devices become intrinsic to users everyday lives, mobile costs per click (CPCs) are on track to surpass desktop clicks.
During the first quarter, Googles average CPC declined by approximately 12 percent, though paid clicks rose by 39 percent. Discussing CPC, Google CFO Patrick Pichette described mobile as still crude, and where search functionality was in 2002 or 2004.
But its going to get better and better, said Pichettean idea Page agreed with, saying that while desktop is the focus for now, over time he expects the reverse be true, especially with Google increasingly focused on things like Google Offers, Google Wallet and Click-to-Call.
Its a lot easier to call someone from your mobile than it is from your computer right now, said Page. [Were getting] more and more focused on that, both on our sales side, and our customers are getting more focused on that. Im very, very bullish on that.
Android Is By No Means a Side Business for Google
3. Android has been called a Google side business, but its actually an invaluable thread running through all its efforts.
When thinking about Android, Page said, its important to think about the longer-term issue. Google is focused on creating a seamless user experience across devices and functionalitiesfrom desktops to smartphones to televisions to tablets and beyond. Its also integral to all of Googles software innovations, from the Google Play store to Wallet, Offers, YouTube, Google TV and everything else.
I think Androids really about increasing the pace of innovation, the usage of mobile devices and our ability to get a great user experience out to our users, said Page.
He later added, in regard to the importance of tablets, Big screens are important, computers are important, phones are important, and I expect that theyll [eventually all] work well together. ¦ I dont think any single device is going to drive all the usage or all the kinds of convergence that need to happen.
What they can all have in common, though, is Android.
Googles Strategy Regarding Motorola Remains a Mystery
4. Google isnt saying much about Motorolabut the analysts are.
On Valentines Day, the Department of Justice gave Google and Motorola its blessing, saying the former could buy the latter. That a software maker would buy a hardware maker is logical; theres just the issue of Google also offering that software to the various other hardware makers.
Its like if the best bread baker sold her bread to happy bakeries around town, but then decided to also open up her own storefront. Her bakery customers would be forgiven for worrying she might stay up nights, working on some special recipes or extra little buns for her own shop. Google insisted in the acquisition announcement that Motorola will receive no special treatment. During the earnings call, however, a flour-covered Google was mum on the topic.
Analysts with Piper Jaffray, in an April 13 research note to investors, suggested the more dire need was for an assurance that Google can improve Motorola smartphones.
If Google is serious about keeping Motorola as a part of its business, we believe the company must address the issue that Motorola does not seem to make devices that consumers want, wrote the analysts. To make the Motorola acquisition work, Google will have to help Motorola deliver better hardware with the newest Android releases, which may upset partners. While the investment in Motorola may not be meaningful enough to truly hurt margins, we believe investors worry that Motorola could become a distraction for Google longer term.
Analysts at Jefferies called the lack of clarity around Motorola likely to remain an overhang on the stock, short term.
It nonetheless maintained its “buy” rating, raising the target price to $850.
