Google’s Next Triumph

Google didn’t just earn more today. It earned better. Way better.

Here is the release. Google’s revenues for the quater ended June 30 were $9.03 billion, up 32% from $6.82 billion in the second quarter of 2010. Now look at the per-employee numbers: Google grew its employee base 9%, from 26,316 employees at the end of June, 2010, to 28,768 at the end of last month. Thus, it had revenues of $313,890 per employee, versus $259,157 per employee last year.

Net Income was $87,075 per employee, up from $69,919 per worker last year. In other words, they grew staff and managed better. Mangement isn’t something Google had been known for for awhile.

Compare that to a few other well-known companies. For the last quarter they reported, IBM had revenues of about $45,000 per employee, and profits of $6,082 each. Let’s go for the money: Goldman Sachs had revenues of $310,548 per employee, and net earnings of $71,400 apiece.

In fairness, there is at least one other company that does better per person. Apple took in $499,392 for every employee in revenues in the recent quarter, and had $115,182 in profits per person.

Respect. But this isn’t a story about them.

How should we look at what Google did better, and should we expect to see it head for an Apple-type level of executiong? From the start, chief executive Larry Page put the improvement down to “greater focus…more wood behind fewer arrows,” which meant closing down projects like Google Health and a power meter reading service, both of which Page championed, but which he had the smarts to quit when they didn’t play out.

There were over 100 tweaks to search and search advertising, which mattered greatly. The better the results, the more people are likely to search again, raising the likelihood they’ll click on an ad. Sometimes simple things, like making ads easier to read, also helped, as did developing software that made it easier to attract lots of small- and medium-sized businesses – still the majority of the world’s economic activity – both in the U.S. and overseas.

All of that will continue. More important, however, are the efforts to make Google pervasive, temporally and situationally. Away from the desk, Google’s Android operating system is now being activated another 550,000 times a day, almost all on phones but increasingly on tablets and other devices. And while Apple still enjoys sales, and Microsoft and Nokia are cooperating closely, Page said, “despite the efforts of some of our competitors, there hasn’t been any slowdown.”

There are also Chrome browsers and notebooks to handle new kinds of online living, and novel approaches to the YouTube video channel (over 100 million people watched the royal wedding on YouTube, who knew?). These include opt-out advertising, now on one-third of the YouTube ads (the feeling is that people who opt in actually watch the ads, making them more valuable) and block purchases –Tmobile put up 46 million images when it took over YouTube.

Much of this is preamble, however. As I wrote a few days into the introduction of the Google+ social network, the long game here is tying together many services, in look, feel, and functionality, so that Google is an essential part of life. That is how Google will keep the profitability going.

“We obviously have a lot of different things for different people,” said Page. “We are definitely working hard to integrate our products better (and make them) beautiful, intuitive, and consistent.”

Some of that is to make situations like mobile information gathering more effective advertising and shopping environments, through the best combination of mobile operating systems, maps, voice commands, and automated payment systems. To that end, Google Wallet will likely receive a lot more attention, as will the emerging Google Offers product, aimed at Groupon.

The even bigger bet, long term, is about moving from situations to the overall course of a day, in the creation and consumption of media, communications, and work products. This will prove not just through products linked at the back end to each other, but in design features employing more flexible HTML5 technologies.

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