Online juggernaut Google
A thumbnail sketch, a jeweler's stone
Ever since its inaugural 2004 10-K report, Google has described itself as a "software, technology, Internet, advertising, and media company all rolled into one." And the band of Googlers is ever-growing:
| Employee Category |
Dec. 31, 2007 |
Dec. 31, 2006 |
|---|---|---|
|
Research and Development |
5,788 |
3,695 |
|
Sales and Marketing |
6,647 |
4,366 |
|
General and Administrative |
2,844 |
1,649 |
|
Operations |
1,526 |
964 |
|
Total Employees |
16,805 |
10,674 |
Nearly every category of employees ballooned more quickly than the 56% year-over-year revenue growth. The sole exception is sales and marketing, at a 52% clip. In 2006, these people were spread out over "32 sales offices in 19 countries." Today, it's "over 60 offices in over 20 countries," where most of the locations are sales-oriented.
That's significant geographical growth. And it's hammered home further by Google's international revenues, which accounted for 48% of sales in 2007, up from 43% a year earlier and 39% in 2005. These guys are kind of coy about their global expertise, though: "We have limited experience with operations outside the U.S. and our ability to manage our business and conduct our operations internationally requires considerable management attention."
That might sound like false modesty coming from a company with a Web-search market share of more than 80% in most European countries. However, there are still a few places that Big G hasn't figured out how to conquer, such as China, where Baidu
Sharpening stones, walking on coals
There are a few small but significant changes to the tone of the whole 10-K document. Where Google used to warn that it had "very little operating history" to fall back on, and that most large advertisers devoted "a very small portion" of their marketing budgets to Internet ads, the "very" adjective has now gone missing in the latest 10-K.
Time Warner's
Sugar cane and coffee cup
Of course, with adulthood comes responsibility. Google used to encourage its engineers "to devote as much as 30% of their time to work on independent projects," an innovative policy that gave birth to hits such as AdSense and Google News. Now, engineers are given 20% instead. You've got real work to do, Googlers!
The company still hasn't generated "significant revenue benefits" from two-year-old acquisitions YouTube and dMarc. Email management service Postini has now joined that list. In other cautionary news, Google notes that operating margins could suffer if the company spends more to "promote distribution of certain products, including Google Toolbar." I suppose we could possibly see that little software gadget popping up in many more places over the next year, then.
Copper, steel, and cattle
The risks Google defines for users with non-PC devices has changed somewhat -- a possible indication that Google will place more importance on mobile Internet access. In addition to cell phones and television set-top devices, smartphones and video-game consoles get their first mention as growth prospects. Given the flood of new high-tech phones and Internet-connected game consoles, that development isn't surprising.
Finally, I'd like to point out that we regular shareholders still don't carry much weight in corporate decisions -- but we're getting there. Management holds 70% of the voting rights, mostly through Class B shares with generous voting powers. That figure is down from 73% a year ago, but it still represents a solid grasp of the company's business direction. Larry Page, Sergei Brin, and Eric Schmidt own 67% of the votes on their own. There is no doubt who runs this show. It's the founders and leaders.
Throw Thoreau and rearrange
None of these changes would be earth-moving by themselves, but taken together, we have a clearer picture of Google's business direction. If you have stayed on the sidelines because of a lack of focused direction, well, Google might always have far too many balls in the air for your tastes. That's just a part of the company's DNA. But for the next year, the picture looks pretty sharp: The order of the day is global growth, mobile access, and roll-up-your-sleeves management.
Playtime is over. Google is going to work.
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