Business

Google is betting big on the future but losing ground in the present (earnings)

If there’s a future of flying cars and humanoid robots, you can bet your behind that its epicenter lies in Mountain View, Calif.

Google’s Q4 in news

That is, if Google can keep up with the financial realities of the present in order to make those dreams of the future come true.

Sure, the company earned $16.86 billion in the last quarter of 2013, up around 13 percent from the same time last year. Its warchest still stands at a healthy $58.72 billion. But Google slipped up in one critical area: mobile revenue in the United States, where it lost around a billion dollars year-over-year, mostly to Facebook.

In 2013, Google grew its U.S. mobile ad business by 83 percent. That’s great.

Until you consider the fact that in 2013, Facebook grew its U.S. mobile ad business by almost 300 percent.

It’s almost as though Google is giving up on mobile — or resting on its past laurels. Here’s what we’re talking about: Google had to cut loose its biggest mobile investment of all time (Motorola Mobility, a $10 billion loss). It’s losing market share in mobile ads to younger, more innovative companies. Its mobile operating system, while popular, is constantly embroiled in legal trouble, and Android is not breaking any ground in terms of features or design in a time when consumers expect miracles from their smartphones.

Mobile is the defining technology of today, and Google is blowing it.

Google’s business has never truly been a mobile business. While Yahoo and Facebook are racing toward an all-mobile revenue stream, Google is mired down in a desktop-first business that revolves around search and email.

If you look at the company’s quarter in the news (above), you will see big thinking, bold moves, and executive eyes focused squarely on the future. It’s almost as if the company’s leadership is bored with mobile technologies. Even Andy Rubin, creator of Android, has moved on to a robot project.

Currently, Google is still the global leader in online and mobile advertising — every Internet company’s main source of revenue. But it’s slowly losing ground to Facebook. If that loss accelerates much more, Google could see its bright, bold future slip away.

Wins & losses

According to analysts at research firm eMarketer, Google took home 32.84 percent of all the world’s online and mobile ad money in 2013. That’s nearly a third of a $117.6 billion market.

While Google is growing globally in its piece of the digital ads pie, it lost a percentage point when it comes to its home turf: While online ad spending in the U.S. grew in 2013, Google got a 39.9 percent share, down from 40.9 percent in 2012.

Where Google is really losing, however, is U.S. mobile ad dollars. Its share of that market shrank from nearly 50 percent in 2012 to around 41 percent in 2013. And you’ll never guess why: Facebook, which nearly doubled its take of the mobile ad business in the U.S. last year.

While Facebook is full focused on going 100 percent mobile — and its revenue shows that strategy is absolutely paying off — Google is making some expensive and odd bets on the long-term future. Smart glasses, a computing contact lens, robotics, self-driving cars. It’s a bit of a dream factory over there in Mountain View. And betting big on 10 years from now might mean some short-term losses, such as Google’s total inability to turn a profit with Motorola Mobility, once the hottest Android smartphone maker in town. But it’s also having an impact on mobile ad sales.

The situation might turn around in 10 years, with Facebook losing the smart glasses ads market to Google. Or it might not. We don’t have access to Google’s crystal ball.

Stock price movement

Here’s a look at what Google’s stock price was doing during the fourth quarter:

GOOG Chart

GOOG data by YCharts

And here’s a look at how Google stock fared side-by-side with a few key competitors, both for the quarter and the full year, shown as percentage change:

GOOG Chart

GOOG data by YCharts

GOOG Chart

GOOG data by YCharts

More information:

Google's innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major glob... read more »

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