Google “Closing In” on Unified Product Experience, Says Soon-to-Be MIA Larry Page
The takeaway from Google’s satisfactory/meets expectations third-quarter financial results, full as it was of details about traffic acquisition cost bumps and amortization expenses, was actually about the unification of products, according to Google CEO Larry Page’s investor statement. “We are closing in on our goal of a beautiful, simple, and intuitive experience regardless of your device.”
On today’s quarterly call with analysts, the news of note was Page’s announcement that he will be making himself even rarer.
Page said he likely won’t be showing up on future earnings calls to give his regular spiel about how excited he is about various product areas, instead leaving the job to his lieutenants, CFO Patrick Pichette and Chief Business Officer Nikesh Arora.
Here’s our live coverage:
1:29 pm: The earnings call is expected to begin shortly. It’s streaming here.
“For years, everyone talked about the multiscreen world. Now it’s arrived, but on a scale few imagined,” says Page. He mentions phones, computers, the home, watches, on Google Glass. (Oh boy, watch mention only a few sentences in. That’ll get people stoked.)
Android sees 1.5 million devices lit up every day, Page says, and he loves Chrome too. But recharging is too much of a sweat.
Today, 40 percent of YouTube traffic is from mobile, up from six percent two years ago.
Biggish news, at least as far as analysts and press are concerned: Page plans to drop out of participating in earnings calls.
“Going forward, I won’t be joining every earnings call,” Page says. “I know you’d love to have me on but you’re depending on me to ruthlessly prioritize.”
Page’s parting words: “About two years ago, when I became CEO again, my goal was to make sure Google maintains the passion and soul of a startup as we grow. … Great is just never good enough.”
1:43 pm: Google CFO Patrick Pichette, who doesn’t have the option of playing hooky on earnings calls, is reading the results.
1:49 pm: Nikesh Arora talks the state of the business.
Enhanced campaigns (a.k.a. Google’s big push to unify advertising) have resulted in bidding more frequently on mobile keywords.
There are 40 million phone calls driven by Google ads every month, double a year ago.
YouTube has become the flagbearer for advertising spending — and Chromebooks, Google Play, enterprise software are recurring and growing revenue, according to Arora.
1:55 pm: On to questions.
Q: How far along are you on voice recognition technology?
Page: We’ve made tremendous progress, even in the last six months. The accuracy has gone up and it’s super fast. We have a lot of usage coming from voice.
Q: How long will advertisers take to fully embrace the multiscreen world?
Arora: The challenge was we used to run different campaigns on different devices, but now we provide one single interface. That’s a good thing, but there’s a lot of work that has to happen on the advertisers’ side, because they have to develop beautiful experiences on different screens.
Q: What’s Google’s e-commerce strategy?
Page: We’re excited about doing a better job; we want to remove friction when people are buying online or in the real world. We need to get the conversion data wherever someone buys something to the advertiser.
Q: Brand advertising gains have traditionally come from print and radio, not television. Is that going to change?
Arora: What’s beginning to happen is as the watch time grows on online video sites, or on Chromecast or gaming devices or TVs, there’s a lot more time on these screens. As that happens, that advertising is more directly attributable, so it’s a superior opportunity for brand customers.
Q & A: Skipping an accounting question.
Q: How do you account for long-term projects? How do they correspond to the R&D budget?
Page: My struggle in general is to get people to spend money on long-term R&D. At most companies, 99 percent of R&D is incremental. I view my job as the opposite, to get people to spend on long-term R&D. People have a perception that’s material, but that’s not been my experience. Even the investments we’ve announced, like Calico (the new health initiative), while they’re significant dollar amounts, they’re not significant for Google.
Q: We’ve had three quarters of high capital expenditures. Is that the new normal?
Pichette: This quarter, capex was about data center construction and opportunistic real estate purchases. Investors should see this as a positive signal. The worst thing for us would be to not have capacity.
(So basically, both Page and Pichette are scolding analysts for questioning their long-term spending.)
Q: You guys seem to have all the pieces in place with Android, Maps, Wallet, etc., to vertically integrate the experience for local transactions. What’s your strategy?
Page: (Instead of thanking the analyst for the compliment, offers him a job.) Google is thinking about improving this, but the question is a good summary of the opportunity.
Q: From an advertising perspective, how do you view the long-term move away from core products?
Page: We sell a lot of advertising and buy modest amounts of advertising.
Arora: We do marketing when we want to increase awareness of products. But the primary focus is on the products.
Q: Would you consider taking Google Fiber outside the U.S., for instance Canada?
Page: It’s early days.
Q: Self-driving cars?
Page: We’ve made tremendous progress, driven large amounts of miles, changed from something that wasn’t going to happen at all to something that’s inevitable, in people’s feelings about it. That said, it’s pretty early days.
Q: Quarterly expectations for CPCs?
Pichette: There are lots of factors. Enhanced campaigns are aimed for ROI of the future. The dynamic of CPCs and paid clicks together is the magic that talks about our growth.
Q: How are you feeling about the holiday shopping season?
Pichette: We’re just closing the third quarter, so we won’t give guidance on the fourth.
Q: What kind of traction are you seeing from localized PLAs?
Arora: We’re transitioning from links to answers, and product-listing ads are part of that because they’re a good experience for the user, especially on mobile devices. But not going to comment on how that will impact going forward.
Q: When will Google get a bigger portion of Play revenue?
Arora: Play fills out the Android ecosystem, having great content and apps. The economics are shared with developers and creators. We’re not going to talk about who keeps what part of the economics.
Q: Thoughts on travel?
Arora: We have flight search, ITA, we’re happy with the business. We’re working to apply entity-level concepts to travel.
Q: What’s the future of cookies in online advertising and ad ID?
Arora: Tech enhancements can improve user security, and we have a lot of concepts in this area, but it’s too early to elaborate.
Q: What’s going on in Japan, seeing lots of Android adoption there so how about the business?
Arora: (Seems to stop himself from saying, “We’re big in Japan.”) Says it’s a big opportunity.
Q: Google Fiber status?
Page: It’s been announced in several places, and rolling out in Kansas City. Neat thing is television service comes through the gigabit data connection, and that’s a great experience.
Q: Can you review the content strategy at YouTube, and willingness to invest in live sports like the NFL?
Arora: We understand that users come to YouTube to enjoy different types of content. Hours watched and usage continue to go up, so content strategy is working. We’re constantly talking to people about content all the time.
Q: There’s been a debate about the Internet becoming more vertical with mobile apps, but your core revenue has been stable. So what’s your positioning going forward?
A: We’re well positioned on mobile. I’m tremendously excited about the potential to improve people’s experience, to make those much more efficient, pleasurable and beautiful. One thing to keep in mind is our effort around the Android APIs and Google Play, those things are evolving all the time. I find myself spending most of my time on mobile, and not in the desktop world.
Q: Project Loon status?
Page: We announced it because we had to, because people were seeing them flying around. It’s a small team, but we’re amazed by the reaction around the world. Internet access really matters to quality of life.
Q: With advertisers having more choice, in particular on mobile, do you see acceleration in dollars from offline to online? How does Google differentiate?
Page: We’ve always competed well in advertising. I think people are getting more excited about moving dollars online. The measurability and the strength of the tools are an amazing opportunity.
Arora: We’ll also see more and more video coming onto the Web. We’ve worked to make a comprehensive solution. If you couple that with measurement, the compelling part of online, advertisers get more info and more options.
Q: Are there any platforms that kicked in internationally this quarter?
Pichette: Revenue is strong internationally in both ads and Google Play.
Q: Motorola is getting close to a billion-dollar run rate in losses. Can you remind us of the synergies? (Snarky!)
Pichette: It’s still early days. We have now great product quality in the Moto X.
Q: What did enhanced campaigns mean for overall spending? Was it incremental to revenue? What about location and time of day targeting?
Arora: We’re not trying to quantify this, it’s an overall quality initiative. Location can be used as a great modifier, time of day too, yup.
Q: What was going on with the deceleration in U.S. business?
Pichette: Our changes in policies really affect our network, which is really heavily weighted to the U.S.
2:30 pm: Page and Pichette say thanks very much, and Pichette cutely but somewhat oddly announces that Google investor relations lady Willa Chalmers, the normal contact for analysts, is out because she just had a baby. And that’s it.