Google Q1 Earnings: “Velocity, Execution and Focus”
Google today gave investors a bunch of material to work with: first quarter earnings close to expectations, an effective stock split, and normally reticent CEO Larry Page’s second public letter (this time co-authored with co-founder Sergey Brin) in a week.
Here’s how Page and his deputies explained it on their quarterly earnings call:
Page said his three main priorities as CEO are velocity, execution and focusing on the future with big bets. Major launches this quarter included Chrome for Android and Google Play.
Responding to criticism of Google+ usage numbers, Page called this “confusion over metrics” and acknowledged that Google+ actually has two parts. One, it is a “social spine” for all of Google; and two, it is a “social destination.” The social spine has 170 million users, and the social destination is “growing very fast … with very healthy growth,” Page said, with all the clarity in the world.
As for Google creating a new class of shares and awarding equivalent stakes to existing investors, Page read out the letter he’d already posted. “We don’t have an unusually big acquisition planned, in case you were wondering,” he said.
Chief Legal Officer David Drummond assured his listeners that despite the effective stock split, all existing Google stockholders will essentially be treated equally and everyone will retain same voting interests, including Page, Brin and Eric Schmidt, who will agree to a “transfer restriction agreement.”
Onto the quarter at hand. CFO Patrick Pichette repeated those three big goals, with a slight twist: “velocity, focus and optimism.” As for perceived dips in numbers, “The most important thing to understand is that our business is healthy,” he said.
It was up to Nikesh Arora to cover the various business units (Susan Wojcicki, who usually helps out, is on spring break with her kids). He talked up YouTube’s progress to become a “key buy” for advertisers, and bragged about new Google Apps customers like Roche and the State of Colorado, accelerated growth in Asia, an underwater Google Hangout from the Great Barrier Reef and Google Street View in Russia.
Onto the analyst questions:
- Headcount growth seemed slower (Google now has 33,000 employees) — why? Pichette said this is just “short term variability.”
- Page said it would be reasonable to expect coming Google+ integrations in products like Wallet, Offers and Maps.
- Success of YouTube advertising shows growth of brand advertising online, said Arora. Page expects that mobile cost per click will improve over time because of local transactions and communication.
- Most resources are still going to core businesses, said Page — still following a 70-20-10 split among core businesses and near-term and long-term bets. Android took six years to get to where it is today, much of that before the public saw anything, he noted.
- Pichette declined to break out U.S. and international cash balances.
- Arora wouldn’t break out traffic acquisition costs for mobile, but said it’s not any different of an arrangement than on the desktop, with OEMs and carriers sharing revenue from Google Play and search, etc.
- Page said social does improve search. He gave yet another shout-out to that Ben Smith guy, who is now highlighted when Larry searches for his name because he’s Larry’s friend.
- As for tablets, Page talked up their media capability. “We definitely believe there’s going to be a lot of success at the lower end of the market as well,” he said.
- Pichette talked again about how lumpy growth and spending is good, and investors shouldn’t be worried.
- How do you account for the value of Android, an analyst asked. Page asked him to think longer-term. “We don’t get very many new operating systems. Only a few in my lifetime, and they’re very important.” He continued that Android is in its early stages, but it’s about the pace of innovation and improvements in user experience, and money will be a part of it, too.
- Page didn’t want to say tablets will eventually be more important than any other device, as an analyst asks him to do.
- Advertisers are interested in ROI — they don’t care about platforms, said Pichette. Google is working toward “dynamically allocating” advertising across its products in order to maximize ROI.
Despite more than a couple repeat questions in there, I don’t think I heard a single analyst ask about the new class of stock. Either they don’t really care, or they were surprised by the announcement and hadn’t prepared for it.