We all know that Google has been going from strength to strength when it comes to product development, innovation and talent. This has allowed the search giant to extend its world dominance in search but also diversify into other areas. Yet again Google smashed its YoY performance when its revenue reached $57.86 billion in 2013. This was much higher than in 2012 ($50.18 billion) and significantly higher than in 2011 ($37.91 billion).
In SEO, PPC, display and content marketing we get excited and at the same time scared of Google’s next big move. Google is undoubtedly a global tech powerhouse but the big question for me is whether anything or anyone can knock it off its perch. It’s particularly timely this year as the cracks are beginning to appear in this well-oiled money making machine. Having said that, the cracks aren’t necessarily being caused by competition from other tech companies but rather from challenges from within. So could Google really crumble under its own weight?
Revenue diversity issues
While Google may be doing everything there is to do in tech, the simple fact is that the vast majority of its revenue still comes from advertising, mainly paid search and display. In Q3 2013 advertising made up 84% of its total revenue.
Without this revenue stream Google would simply collapse. It’s not going to happen any time soon but I’m sure diversifying its offering is a top priority.
Declining desktop searches and ever declining CPCs (cost per click)
Even Google is not immune to the reality of product life cycles. As desktop search declines so too does the revenue from that stream. Something that’s been particularly painful to look at as an SEO specialist is how hard Google seems to be trying to mimic organic search results in PPC ad space. The background colours behind the ads have been gradually getting lighter and have now disappeared altogether. That’s just the beginning. What about the product listings, the knowledge-graph-like ads, larger PPC site-links, paid for call to actions and the most recent design change involving increased font sizes for all search results including the ads? Despite these efforts, the number of desktop searches are in decline.
Obviously Google has been the first to identify this as a threat and go mobile first with everything it does. Then the mobile and tablet exploded and everything seemed to be fine again. However, is this still the case?
Google search results on desktop are very different to those on mobile. Small screen sizes and the font size required for good user experience mean that results on mobile are far more compact.
There simply isn’t enough space to display more PPC ads in mobile search. Additionally, the search behaviour on a mobile is very different – less exploratory and more informational. The end result is less ads and lower cost per click. This is a big problem for Google right now. So much so that Google has taken a drastic yet successful measure and introduced a compulsory change to the way PPC ad campaigns are run called “Enhanced Campaigns”. This has effectively removed the option of having separate bids on mobile and desktop.
In fact, a forecast from eMarketer states that Google will lose $1.4 billion in desktop search revenue in 2014 as paid clicks partly migrate to mobile devices.
High expectations from investors
Google’s revenue has been delivering sizable growth every quarter for the last few years.
(Image source: Moz)
This is all good but can it last? Is Google its own worst enemy? If Google stops delivering such amazing results then eyebrows will be raised not just by investors but also by employees, some of the best talent in the industry. This can then change the dynamic very quickly. From being at the forefront of all things tech, Google may need to fight to keep the people that made it all possible.
Facebook Search in the next five years
Make no mistake about it. Facebook Graph Search will be awesome. It was confirmed by M. Zuckerberg when he announced his five and 10 year plan for Facebook. The platform is at the stage of gathering enough data to provide a super intelligent, next generation search experience. Using all the data it has access to and some serious AI and neural network algorithms, Facebook can really disrupt Google’s market share and/or engagement in search.
SEO - the arch enemy of Google’s search revenue
There is a reason why Google doesn’t care too much about SEOs or about the support for organic search. Yes, there’s the issue of integrity as Google knows users expect the organic search results to be unbiased. However, there is another, hidden aspect to it. In reality, organic search is the biggest competitor to its best performing product.
These are just some of the key challenges that Google is facing. Being an enormous tech giant means it’s hard to continue delivering amazing bottom line results every quarter and at the same time plan and invest in the next big thing that will keep it ahead. Personally I think we could do with more variety and competition in search – it’s never healthy to put all your eggs in one basket.