Weaknesses revealed in the Facebook financial model at its Initial Public Offering [IPO] recently, are now suggesting related problems at Google.
Google’s business model under scrutiny
For Facebook, the weakness in the valuation of its shares was considered by commentators as difficulties in converting its billion or so friends into means of selling advertising opportunities to commercial clients. Google’s business model has also come under scrutiny, after last week’s embarrassing leak of its financial figures [18th October, 2012].
A tipping point?
A minor operational error at Google last week involving a premature release of poor financial figures resulted in a stock-market blip. But the blip is now being taken more seriously. and has been tagged on to wider criticisms of the Company’s business model. If you believe in tipping points (and I’m not sure I do), it’s a tipping point.
The doom scenario
Such times call forth the doom scenario. On 20th October 2012, The popularist Daily Mail newspaper in the UK asked whether Google could disappear completely
As Google suffers a catastrophic nose-dive in its market value, analysts are already predicting its demise as the world’s lead Internet search engine.
Advertising revenues are falling — and will continue to fall — for Internet companies because consumers are increasingly migrating to mobile applications and advertisers aren’t willing to pay as much for [advertising through mobile phone platforms]
Realisation is dawning
Realisation is dawning that what is happening to Facebook is part of a wider economic shift.
“I keep saying Facebook isn’t the only one that has a mobile issue — Google does, too,” Colin Gillis, an analyst for Boston Consulting Group, told CNBC.com. “I keep saying Facebook isn’t the only one that has a mobile issue — Google does, too. If you are an investor in Facebook, ‘mobile’ is priced into earnings. I don’t think mobile in Google is priced in.”
The deepening story
The deepening story this week brought news that a dispute in Brazil has resulted in Brazil’s National Association of Newspapers [ANJ] saying that all its 154 members are following its advice to ban Google News from accessing content free.
Since 2010, the ANJ had experimented with giving Google News free access to its first few lines of stories. Google had sold them the idea that the arrangement would grow traffic for the Brazilian sites. But it turned out that it has, if anything, reduced traffic.
If the ban continues, Brazilian Internet users will still be able to find content if they use Google rather than Google News in searches. But Google says newspapers and news aggregators should be able to reach a negotiated solution to the problem.
Charging the taxi driver
Google’s Public Policy Director, Marcel Leonardi, suggested that the ANJ’s demands are like charging a taxi-driver for taking tourists to eat at a particular restaurant. But Google says newspapers and news aggregators should be able to reach a negotiated solution to the problem.
Page remains upbeat
Unsurprisingly, Google co-founder Larry Page was more upbeat, telling investors [19th October, 2012] that the company was uniquely well-placed to exploit mobile phone technologies, which he saw as in a transitional stage leading to multiple screen usage.
Page was making his first public speaking appearance since June 2012, a silence which had begun to produce health rumours.
Google executive arrested in Brazil
In another story, a senior Google executive in Brazil was arrested [Sept 26th 2012] for failing to comply with a judicial order to take down You Tube materials ruled to be in violation of the country’s electoral law.
August 17 2018
The turbulent events covered in this post may (or may not) have contributed to the restructuring of Google into Alphabet