Posted on 2 Nov 2012 at 14:49
Google – once the tech stock that everyone wanted in their portfolio – has seen very little change in its share price since late 2009. In some ways, this reflects a company that, after years of rapid growth, has now reached maturity. Yet Google must quietly fear that the only way is down.
Still, 90% of its revenue comes from search advertising, either on its own site or via its partner network. While Google remains the undisputed king of search, with no obvious sign that its dominance is under serious threat, its failure to find another significant profit stream could be considered a weakness.
Google has arguably exceeded expectations by making Android the world's most-used mobile OS
It isn't through lack of effort. Google has arguably exceeded expectations by making Android the world's most-used mobile OS, but it isn't an outright money spinner.
The OS is free, and Google has incurred considerable costs in acquiring hardware manufacturer Motorola Mobility, and (we suspect) in subsidising hardware from third-party manufacturers, such as Asus for the Nexus 7. Whether Google can recoup that investment with services such as location-based advertising is doubtful.
Meanwhile, Google's Chrome OS and associated Chromebooks have entirely failed to catch on. This leaves Google at a considerable disadvantage compared with both Apple and Microsoft, which have the full gamut of mobile and desktop computing covered (even if Windows Phone remains unproven).
On the web front, Google has repeatedly struggled to crack social networking, and Google+ looks set to join Wave and Buzz on the casualty list. The spectre of persistent EU anti-trust investigations also threatens to drag the company into the same courtroom stranglehold that suffocated Microsoft at the turn of the century.
Yet, as Microsoft did around the year 2000, Google has an almost unbreakable monopoly on its core market – search – and enough spare cash to do as it pleases. It may lack Apple's innovation and hardware, but its tech superpower status remains intact.
Verdict: HOLD
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