Google Revenues Surge With Key Expansions

Google posted a 36 percent surge in revenue in the past quarter, suggesting its efforts to become much more than just a search engine are paying off.

The Mountain View, Calif.-based company's search advertising business, along with new efforts such as display and mobile advertising, boosted revenues by over a third. Its stock shares went up by 12 percent this past quarter as well.

Google's success comes from its expansion into numerous businesses.

'The combination of mobile search, Android, ad exchange, YouTube, and the core search businesses, they're all doing well,' said Jordan Rohan, analyst at Stifel Nicolaus. 'Google is no longer a one-trick pony.'

As Google's revenue surges, its spending also climbed. The company's operating expense rose by almost 50 percent, to about a third of its revenue, leading some analysts to worry that operating costs and acquisitions may hinder future earnings.

The company's foray into social networking, Google+, may also bring further growth to its coffers. Google CEO Larry Page told stock analysts Thursday more than 10 million people have signed up for the new service, which is still in its early stages, and not yet available to the general public. If it is successful, Google's latest foray into social networking may bring even more profits to Google's advertising revenues.

Google may also see additional growth through Android. The company reporting users activate 500,000 new Android devices every day. Google's strategy of giving its OS to device makers gained Android a third of the U.S. smartphone market, nearly guaranteeing Google's mobile search and related products a strong presence.

The Internet giant's AdSense division may also see continued growth with the rise of Android. It already accounts for almost half of all mobile advertising, and with the growth of the smartphone industry, AdSense should continue to become more prominent.

Google's expansion into mobile commerce may also trigger a new revenue source. In May, the company announced its E-Wallet service, which allows people to purchase items by tapping or swiping their Android smartphones in front of a merchant's payment reader. If Google can gain a foothold in the burgeoning mobile commerce industry, it may see its stock continue to climb if consumers adopt the new technology.

There are, however, some clouds on Google's sunny horizon, with the company vulnerable to legal action surrounding its Android platform. The Internet giant is defending itself against a patent lawsuit filed by Java owner Oracle, which alleges Android violates several patents that Oracle acquired from former Java owner Sun Microsystems.

Oracle seeks $2.6 billion in damages from Google.

The search company was given until July 21 to answer a series of questions from the case's presiding judge, who said earlier this week that Google may have known its Android mobile platform violated Oracle's Java patents, but went ahead with infringement anyway.

Lawsuits like these, in addition to Google's rising operating costs, could cut into the company's profit margins if it is not able to balance out the legal entanglements with its subsidiaries' successes.

Google Revenues Surge With Key Expansions originally appeared at Mobiledia on Fri Jul 15, 2011 1:54 pm.