The Google State Of The Union: Strong Yet Vulnerable

Earlier today, Google published its annual Founders’ Letter. This is a kind of “Google State of the Union” missive that Google has published annually since it went public.

Many bloggers picked up on the following remark in the document penned by Google CEO Larry Page: “[I]n many ways, we’re a million miles away from creating the search engine of my dreams, one that gets you just the right information at the exact moment you need it with almost no effort.”

Some people also commented on the glaring omission of any discussion of privacy — an issue that has generated numerous problems for Google around the world, most recently in the form of the European Union Court of Justice’s establishment of a “right to be forgotten” (by Google). There was also no discussion of the myriad legal investigations and anti-competition claims still pending in India, Canada and, potentially, once again in Europe.

Overall the letter spoke about Google’s massive scale (“over 100 billion searches a month”) and equally massive ambition (project Loon: “a network of [internet access] balloons on the very edge of space”). There were also various points made about how mobile has impacted Google:

• Voice Search . . . now works in over 38 languages
• Google Now . . . provides information without your even having to ask . . .
• [W]e’ve also made significant progress understanding people’s context, which is crucial if we are to improve human-computer interaction
• Improved context will also help make search more natural, and not a series of keywords you artificially type into a computer.
• In less than six years, over one billion Android devices have been activated (and growing fast)—creating an amazing platform for the increasing number of app developers globally

In many ways these are the key points. Driven by the imperatives of the mobile device revolution and mobile user expectations Google is actively evolving search beyond the familiar query-in-a-box to something that is more “anticipatory” and “push-centric.” This drive to better meet mobile user needs is in part the source of many of the anti-competition complaints against Google.

Interestingly, many of the changes happening in mobile are making their way back to the PC, such as voice search and Google Now’s info-cards.

Several people at Google, including Matt Cutts, have indicated that, globally, mobile search volumes may surpass the PC this year. Google appears very well positioned; it has more digital and mobile ad revenue than any other company. Indeed, Google captures more than half of global-mobile ad revenue.

In addition, Google controls the world’s dominant operating system and also dominates mobile web search (94 percent global market share). Yet paradoxically its position in mobile is more precarious than on the PC.

Most consumer time (89 percent) in mobile is spent with apps, which have the practical impact of “disintermediating” Google — that is until it can integrate app deep links into mobile search, which it’s working on.  Moreover, a full third of Google’s paid clicks are coming from mobile devices, which are right now delivering lower CPC rates.

So while Google seems at the apex of power it is also vulnerable to changing consumer patterns and, to some degree, intensifying competition in mobile (especially from Facebook).