One knock against Google (NASDAQ:GOOG) in its latest earnings results was its ambitious hiring practices over the past quarter. Was it money well spent?
In the company's most recent quarterly earnings conference call, we learned that many of the new hires were international. In this edition of "Fool on Call," we will focus our attention on remarks management made in the call regarding Google's international expansion efforts. I think we'll find that while the company may have paid a hefty price over the short term, these new hires and innovations will likely become a key driver of growth.
International talent
CEO Eric Schmidt didn't get far into his prepared statement before he addressed the topic of new hires and international expansion efforts. In his opening remarks, he stated, "We're very focused now on people spending their time searching, using information online, and doing it in a global way." The emphasis here is mine, but it is a reflection of just how important the topic was during the conference call.
For end-users to be able to harness Google tools in a global manner, there has to be a global system to support such functionality. And systems require people, as Schmidt made clear: "We are growing rapidly, building the best infrastructure, hiring the best to extend our footprint internationally." He added, "By focusing on the best talent, we have a growing percentage of international hires and international offices contributing to our product set."
A critic may contend that a search engine is a search engine -- that Google can just keep rolling out cookie-cutter versions of its U.S. format and apply them the same way in international markets.
But it's not that easy, because Google isn't the only game in town. It's up against traditional powers such as Yahoo! (NASDAQ:YHOO) and Microsoft (NASDAQ:MSFT), and it's also competing against numerous, more localized search engines -- one example being Baidu.com (NASDAQ:BIDU), which is uniquely tailored toward Chinese and Japanese languages.
For these reasons, Schmidt said it is necessary to "localize products" in terms of search capabilities, ads, and applications, for each international market. He asserts that the company is already seeing progress from such initiatives: "We are seeing significant gains in terms of our role and our impact in each of these languages and cultures in ways that matter to end-users."
He further stated that the company's "global growth strategy is working." The evidence is in the numbers: International sales now represent 48% of the company's net revenue. European markets such as Spain, Italy, France, Germany, and the U.K. were all key performers in the quarter. Emerging markets such as Brazil, South Korea, and China are also doing well.
Global initiatives
Now let's look more closely at a few examples that highlight key innovations targeted for international growth.
Founder Sergey Brin was very enthusiastic about Google's "universal search" capability that rolled out in the second quarter. What this means is that Google search results will now pull up images, videos, news, maps, and books, simultaneously. A great deal of infrastructure work was necessary to accomplish this goal, but now that it's functional, Brin indicated that the same capability will soon be available to international domains.
Another international initiative is the experimentation with new kinds of homepages tailored to local markets. Brin offered examples of homepages in Taiwan, Korea, and Hong Kong that are "more appropriate for the local cultures and their context" yet are "completely different" from the U.S. Google landing page. He added that the initial results of the testing are "quite positive."
In addition to localized homepages, Google is implementing "cross-language informational retrieval" for its search engines. So when you do a search in one language, it will bring up the results not only for that language but for other languages as well -- all translated. Pretty nifty.
Building for the future
As it usually does in its quarterly earnings conference calls, Google's management team discussed the progress of certain partnerships, including those with eBay (NASDAQ:EBAY) and now the Apple (NASDAQ:AAPL) iPhone. Management also highlighted new advertisers, such as Coca-Cola (NYSE:KO), which ran some content in France during the quarter. Partnerships such as these are obviously important to Google's business. It was made very clear in the call, however, that to Google, the partnerships are only as good as the underlying products and infrastructure that support it.
Google is using a lot of resources to build out its international infrastructure. Time will tell, but I'll bet that it will prove to be money well spent, particularly if Google hopes to do more than just survive in the years ahead, but actually thrive in a global future.
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Fool contributor Jeremy MacNealy has no financial interest in any company mentioned. The Motley Fool has a disclosure policy.
