The state of Google: signs of a downfall or of growing up?

Mon 19 January 2009 13:40, Bas van den Beld

The state of Google: signs of a downfall or of growing up?

This Thursday Google is telling us how have been doing financially in final Quarter of 2008. Some reports around the web are that the numbers might not be that good, others say Google will yet again show a growth.

There are several signs Google might not be doing so well. In the last months news about cutbacks, closing of offices and services were several. Let’s take a look at the signs. Is Google in trouble? And what effect will bad numbers have on the industry? Or is Google just growing up?

Cutbacks
A sign of Google not being immune for the financial crisis might be the cutbacks Google has been making in the last couple of months. Last October the news came out that Google was going to cut in its contractors. Google has got 24.000 employees worldwide. About 4.000 to 10.000 of them are temporarily employed by Google. A lot of them are not being rehired.

But also the Googlers with a regular contract are not safe. Only this month Google announced it would go and eliminate 100 jobs. It will dismiss recruiters worldwide.

Laszlo Bock, vice-president for people operations admits on the Google Blog Google is thinking about the economic state of the world: “Google is still hiring but at a reduced rate. Given the state of the economy, we recognized that we needed fewer people focused on hiring.

Dontwork

Google has never before laid off employees. This could indicate troubles at the search giants, but it could also be interpreted the other way around. Google has been known for acquiring companies, trying out new stuff and not eliminating anything. Could it be that Google is doing just as well as before but is now, like a real company, looking forward?

Christimas bonuses
In other years Googlers found a financial bonus in their Christmas giftbox. This year things were different. Instead of the average of 1000 dollars Googlers received a Google Android phone, worth about 400 dollar. With 24.000 employees that is a saving of about 14.400.000 dollars. In their e-mail to the employees Google said choosing for the phone instead of the money also had a financial reason. “the current economic crisis requires us to be more conservative about how we spend our money.

Closing of offices
Only yesterday we reported the closing of the Google offices in Norway and Sweden. With another closing in the US not even mentioned there it definitly seems like a cutback. Though Google insists the closing of the offices is not because of the economic downfall, but an effort to de-fragmentize the company, it sure has all the looks of a cutback. The employees are offered a new job, but not all of them will take it and the reduction of costs will also be large.

No more fooling around
Google was well known for the 8 hours a week that full time employees could spend on whatever projects they liked. A lot of companies even copied this. They did this to improve the creativity and get those great ideas that made Google big. However last year Google decided it was time for a change. The 20%-rule was cancelled and Google now looks for new ideas in different ways, like their users. With Google Product Ideas they try to get the ideas from elsewhere and for free. This will save the company a lot of money. Just calculate what a work day for each of your employees costs and do the math…

Googlemirror


Services stop yet research goes up
Last week Google announced it would be closing down some services like uploads to Google Video, Catalog Search, Notebook, Dodgeball, Jaiku and Mashup Editor. You could see the closure of these services as a sign that Google is having troubles, however I feel that closing these non-profitable services makes sense for a company trying to make money. Plus Google said it would still be spending 18% of its total yearly expenses on research and development, which indicates Google is not cutting back on being innovative.

Google stock
Finally the Google Stock. When 2008 started the Google Stock was at an all time high of 600 US Dollars. Today is half of that: 299 dollars.

Googlestock
The drop of the stock can be seen as a sign that there is less trust in the company’s revenue possibilities. However it could also be that the stock was too high in the first place.

Spendings are down, right?
Last week IPA’s Bellwether reported that almost half of its respondents would be cutting down on their marketing budgets. But reports on whether or not businesses are spending less on search advertising are different.

Search advertising firm Efficient Frontier reports U.S. search advertising spending fell 8% in the fourth quarter of 2008 compared to 2007. However Adgooroo reports that Q4 showed an increase of first page advertisers.

What we know is that Google still has the biggest market share of them all, but it all depends on whether or not the market itself is growing or not. If Google has got the biggest share of a shrinking market that’s no guarantee for success.

What will the search market do in 2009?
Will the search market be growing or declining in 2009? A quick look at Google Insights still shows a lot of interest in the subject of internet advertising. There was a decline at the end of the year, but almost immediately after the new year searches about internet advertising went up again. And also a quick survey on Twitter indicated the interest in search is far from declining. Agencies are not feeling the economic downfall hitting them hard so far.

Emarketer recently predicted a growth of search advertising in 2009 of 14,9%. Seems nothing is wrong there, however if you look at 2008 the growth was 21,4%. So though the market is still growing, it’s not growing as fast as before. But that is not alarming so far.

I think it’s safe to say that businesses are looking at their spendings and are trying to cut down on them. Especially companies in industries like the financial or the automotive business will probably be spending a lot less on advertising. This will definitely be felt by the online marketing industry.

However, economic downtimes are usually the times in which the best ideas flourish. Businesses are looking for different ways to get attention and find new clients. The eyes of businesses might very well be looking more and more towards the web. And since search marketing and search advertising are ways which are affordable and measurable businesses will probably be advertising in search engines more.

Therefore you can say that there are opportunities lying ahead for the search industry. But beware. Businesses will look at the web more, but will also take a more critical look about what they are getting themselves into. This means it’s not just spending money but wanting real value for their money. This could mean that like after the first internet-bubble, only those companies which are working like a real business will survive. It will mean another step in professionalizing the business.

What if the Google numbers are bad?
But what if the numbers Google is telling us about Thursday turn out to be bad? What if Google is really in a crisis? What will that mean? That might change things. If Google is really doing bad this will have its impact on the industry. It will probably lead to business being less eager to try search marketing. Because if Google can’t make it, who can?

Googlenasdaq

But to be honest, very probably Google will hand us profitable numbers this Thursday. I personally feel that Google is professionalizing itself. The cutbacks, the closing of services and offices, it all fits perfectly well in a company which wants to grow up. Google is taken precautions for when an economic downfall might hit them, and that makes perfect sense. All the signs which could be interpreted as being a sign of downfall can also be interpreted as a sign of growing up. A company should look forward and work as efficient as possible. And if that means cutbacks, so be it. Then again, if the signs really mean Google is in trouble we all are going to feel the pain.

To get an idea of what the search market is thinking we’ve added a poll to our website about this topic. We would like to find out whether you think that if Google would be in trouble, the industry would be too. So please fill in the poll!


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