Google shares fell nearly 5% in after hours trading tonight to $548 – that’s a 14% fall since January when it was announced that Larry Page was back in charge. Although Q1 2011 revenues were up 27% at $8.58m (compared to Q1 2010), profits missed analyst forecasts. Net income rose by 17% to $2.3bCosts are clearly growing significantly as Google strives to find new revenue sources to counter the effects of Facebook and apps. Interestingly in the UK, its largest market outside the US, revenues rose by ‘just’ 15% to $969m representing a fall from 13% to 11% of Google’s revenues.
Regular readers know of my skepticism about the medium term future of Google. See Growing doubts about Google and the many previous warnings I have made about the dangers Google faces from new ‘Closed Gardens’ like Facebook and Apple Apps. 27% growth is of course pretty good – except that investors had got used to Google reporting 40%+ growth every quarter. All the signs indicate that Page now realises the battle he faces for the advertising $ of the future. He’s now prepared to invest heavily in ensuring Google stays in the game. But, in the past, Google was seen as a safe haven. Afterall it pretty much owned sponsored search. Now those $ are moving to social networks and Google so far doesn’t have a credible play there. Of course, it could do what Microsoft did when it faced Netscape in the 1990s. Or it could do what Microsoft did when it faced Google in the 2000s! Suddenly the ‘safe bet’ doesn’t seem so safe anymore.