“Do no evil.” Any fan of Google knows these famous words, which for years have been Google’s motto. This motto was apparently created by two fortunate graduate students did not know in 1995 that they were going to start the biggest search engine of the world. When they started working on their research project they ended up leasing their search algorithm to Yahoo! and eventually eclipsed them when they went off on their own. Google came up with a search algorithm that gave websites the grounds and ability to compete for organic rankings using a vote, or “link” based system. The company became a public company in 2004 and started earning from its shares.
Google is Kicking Butt
The company has been doing great since then and we all know Google’s position in the online world today. With such great pace of growth investors from all over the world took interest in buying its shares and they did with great expectations. Investors have been happy with their investments in Google shares and they can hope for some great profits on their shares as Google continues to dominate the smartphone operating system market and successfully endeavors to put driver-less cars on the roads, and quite possibly taking a huge bite out of the personal injury law profession in the process.
Is Google Transparent to Its Investors and Fans?
There is one thing though that has been causing discomfort in the community of investors. That one thing is Google’s level of transparency in disclosing its revenue earning yearly. Market analysts have been long talking about Google’s take on its disclosure of revenue that has remained quite a mystery since the beginning to this day.
What’s Wrong With Google’s Revenue Reports?
When you are growing to be as big a company as Google you need to disclose your sources of revenue in a way that could satisfy the analysts in the market and of course your stakeholders. However, that has not been the case with Google’s revenue reports. It is not to say that Google does not disclose its revenue sources at all but the way it does is not satisfactory given the number of products it now has in the market. Analysts and stakeholders of Google expect the company to disclose the reports of its revenues product and region wise.
When you visit Google’s investor page you find a very generalized report of revenue there. The report consists of only two categories: the revenue that comes from advertising and the revenue that comes from all other sources. The quarterly report from the company, which should be quite detailed, contains the revenue source from only 3 broad regions i.e. United Kingdom, United States and the rest of the world.
Such a reports answers fewer questions and rather raises more questions. Google’s highlighted services include Gmail, Youtube and Google Play. Every concerned person is quite interested in knowing how much Google earns from these services. We also know that India and China are the biggest countries of the world population wise.
They also constitute the biggest internet user database in the world. How much is Google earning in these two countries? This question remains unanswered because Google does not provide any such information.
What Does The Latest Revenue Report From Google Contain?
The detailed quarterly report that came from Google in the last quarter of 2014 showed that Google is still on the right track and going in the upward direction with revenue coming from its partner websites with an increase of 20%. There are other websites in Google’s network that earned it a 0.6% revenue. (See latest “GOOG” Stock reports here.)
- Other Revenue?
The best category for Google was its “other revenue.” This particular category shows that Google’s revenue went up by 40% from previous years. However, just like previous years Google did not show the world how much it earned from various regions and what products earned it how much.
Morgan Stanley, according to the latest Business Insider report, communicated with Ruth Porat, the current CFO of Google, through a letter and requested the search engine giant to be clearer in disclosing the details of its revenues. To convince Google to disclose a detailed breakdown of its revenues Stanley Morgan also cited the position of other big giants on the internet such as Amazon and Facebook.
Stanley mentioned in the letter that these big companies were having better valuations of their stocks because they were clearer with the disclosure of their revenues. We must also mention here that the company that is best at disclosing the details of its revenues is Apple that gives a detailed product by product and region by region breakdown of its revenues.
When we look at Facebook and Amazon, they are clear about their breakdowns but not as much as you would expect them to be because Amazon is a company that has literally thousands of products listed on it and Amazon also likes to introduce its own products off and on. Despite this Google has been known as the company that remains most unclear about its revenue reports.
Google’s Response to Stanley
It’s been a long time since Google has not revealed a detailed breakdown of its revenue. This has made the giant quite rigid about its approach. Morgan Stanley was not able to convince Google to change its course. In fact, he did not receive any response from the company. This only made Stanley reveal what was within his knowledge about Google’s revenue generation. He performed the investigations and analyses that revealed a lot of information about Google’s revenue.
According to information from Stanley, Google earns a huge chunk of 15% of its revenue from its most prominent services i.e. Google Play and Youtube. This gives us a great insight into how Google has been performing with these two services. If we take into consideration the reports that were produced in 2010 these two services were contributing only 4% in the total revenue of the company.
It has also been predicted that with the current progress that Google is making with the aforementioned services it would be earning a huge 24% revenue from them as it goes into 2020.
With Revelations that Google whitelists certain sites so that algorithms can not hurt their rankings, during the European anti trust lawsuit, we can tell for sure that Google is not much interested in sharing information about many things, including its revenue. But it would be a surprise that such a huge company wouldn’t know the consequences of such a practice.
We cannot predict the behavior of its stakeholders, of which I am one, in future if Google continues to keep them in the dark about its revenue generation. Many would say this very behavior is the personification of “evil,” while others may just sing the party line.
But from past experiences, we can tell that this is going to have a bad impact on its overall reputation, since it is politically incorrect to make profits and not spread the wealth around these days. We predict that the more that there is news about Google’s practices in the alternative news media on the internet, the more it will go against Google.
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