Google reported a 19 percent increase in revenue for the first quarter, but results from its advertising business were mixed.
Revenue for the quarter ended March 31 was $15.42 billion, Google reported Wednesday. That was a healthy jump from last year but less than the $15.52 billion analysts had been expecting, according to a poll by Thomson Reuters.
Google’s earnings per share, excluding costs like those from the sale of its Motorola Mobility division, were $6.27 per share, which was better than last year but also lower than expected.
The results hurt Google’s share price in trading after hours. Its stock was down about 3 percent at the time of this report, to $541.13.
The number of paid clicks, or clicks on ads paid for by advertisers, climbed 26 percent from the first quarter last year, Google said. But the cost of those clicks, or the amount advertisers paid, dropped roughly 9 percent.
Subtracting traffic acquisition costs, or the money Google pays to partners that run its ads or direct traffic to its websites, the company’s net revenue was $12.19 billion.
China has been a tough market for U.S. Internet companies to crack, but LinkedIn has high hopes it can buck the trend and increase its user base in the country to as high as 50 million over the next five years.
“This is a very long-term investment, it’s not an experiment,” said Derek Shen, head of LinkedIn’s China operation on Friday.
The social networking site officially entered the nation’s market back in February, and is targeting China’s growing number of working professionals, numbered at over 140 million, according to the company. To reach those users, it launched a Chinese language site called Lingying.
LinkedIn, however, wants to avoid the same fate as other U.S. Internet companies that have struggled to take off in the nation’s competitive market. Google, eBay and Groupon have all come up against local roadblocks, including stiff competition from domestic rivals, and China’s notorious online censorship.
In LinkedIn’s case, the company studied the Chinese market for four years before finally deciding to enter the market, Shen said at China 2.0 Forum, an event in Beijing organized by the Stanford Graduate School of Business. Currently, the site has about four million users in China.
The failure of some international companies in China may be due to their structure or lack of incentives for the operation to succeed, Shen said. “So we decided in China, we wanted to do a startup,” he added.
Social media is the most popular online activity, so it makes perfect sense for businesses to want to tap into it to increase sales. More than 90 percent of businesses use social media.
But simply opening an account or sending out some tweets is not enough to make social media platforms a viable and profitable part of your marketing strategy. By avoiding some missteps, businesses have the ability to increase their return on investment (ROI) and create more opportunities from social media accounts.
Avoid these mistakes:
1. Not having a strategy.
Less than 20 percent of businesses say their social media strategy is mature. Social media users are constantly inundated with information and messages. Businesses that don’t have a social media marketing strategy won’t ever cut through the clutter and deliver an effective message to their target audiences.
Creating a strategy includes having distinct and measurable goals, developing a clear social media policy, thinking through a brand’s social media voice and planning out a content calendar with end goals in mind. Without a clear strategy, businesses could create the best content on the Web but receive little to no engagement.
2. Not integrating with other digital assets.
Social media works best when you integrate it with other digital marketing efforts. One mistake many businesses make is to leave their social media accounts on islands. Not only should you link the accounts together, but tie them directly to websites, emails and paid search advertising campaigns.
“In the last year we’ve seen our Explorers use Glass in really inspiring and practical day-to-day ways,” the Google Glass team wrote on its Google+ page. “Something we’ve also noticed and are very excited about is how Explorers are using Glass to drive their businesses forward.”
The Washington Capitals, Washington D.C.’s hockey team, has already been working with fans who use Glass, Google noted. The Capitals partnered up with APX Labs to create a Glass app that allows the team’s fans to see real-time stats, instant replays and different camera angles.
The hockey team may be a good example of how businesses can take advantage of Glass, or any upcoming wearable, according to Patrick Moorhead, an analyst with Moor Insights & Strategy.
“My contention has always been that wearables are a best fit for vertical applications,” he said. “I think this is good news and I think companies will use this program. It is Glass’ best shot so far at an ecosystem. In these vertical usage models, it’s more about getting the job done versus looking cool to your friends.”
Moorhead also noted that with Google trying to push Glass into the enterprise, it might signal the company’s realization that building out a horizontal platform will be more difficult than once thought.
There’s a problem with most of these debates. They mostly focus on the rich world, and that’s increasingly not where the action is.
The smartphone market in the rich world is maturing. The growth is in the emerging markets and, increasingly, as hardware prices go down and connectivity goes up, the growth will be coming from poor countries. Cell phone ownership (albeit of the dumbphone kind) is already very high in sub-Saharan Africa; if Google’s Project Loon doesn’t make cheap wireless high-speed internet ubiquitous some other technology will; and some time soon the equivalent of a second-generation iPhone will be as cheap in poor-country-salary hours as a cell phone is today.
As I argued in a previous column, this actually creates an opportunity for a new platform to emerge. Today, the cheapest smartphones still have limited chip and memory capacity and battery life, which means that a software platform tuned to those limitations is attractive. OEMs like China’s ZTE who are comfortable working at very tight margins and have astonishing expertise making really cheap devices have made a big priority of winning this market, while Samsung and iPhone battle it out for the high-margin segment.
All of this points to an opportunity in the way of the classic disruptive innovation model: Attack an underserved segment of the market with a cheaper, lower-featured product, and gradually eat your way up the value chain as the incumbents spend their time focusing on the premium side of the market.
Over the last week the question of why Facebook would spend $2 billion buying Oculus Rift, a maker of virtual reality headsets has been asked repeatedly. In a world where wearable technology is generally seen as the next big thing, a pair of rather large VR goggles appears to run opposite to the approach taken by GoogleGOOG -2.94% and more recently MicrosoftMSFT -2.15%.
Simply put, Google has taken a much more contextual approach to how it believes you and I will consume its services. It’s a strategy that sees a combination of ubiquitous mobile phones, wearable technology and globally available Internet, built upon a collection of web connected things. These things include Nest, a web connected Thermostat, Google Glass, a wearable heads up display of information and recently its announcement of Android Wear, a version of the popular mobile OS tailored specifically for wearable tech products. Adding to the mix are some of its ambitious R&D efforts like “Project Loon” which looks to use a global network of high-altitude balloons to connect people in rural and remote areas who have no Internet access.
Through these activities it seems Google’s strategy is to create contextual elements that augments your existing reality with data specifically tailored to you as you live your life. Or in other words, they are not looking to immerse you its world, so much as to help adapt and improve your existing world by adding to it. Combined with Google Now it’s a strategy that tries to anticipate what you need to know before you ask or even know what to ask.
Imagine a future where you’ll be able to physically reach out to poke your Facebook friends (gross), where tweets are the de facto mode of communication for large-scale emergencies (cool), and where people log into Google Plus for more than just wondering, “Are people using Google Plus yet?” (Okay, okay, we couldn’t help ourselves with that one — but really, we actually are, so put us in your circles already.)
If those scenarios seem far-fetched, perhaps you’re thinking too near-term. Whether it’s through major acquisitions or seemingly minor service enhancements, the major social networks are making changes to their products on a weekly, daily, even hourly basis. Fortune asked a few experts to daydream about where these networks might be five and 10 years down the line. Their responses were surprisingly realistic.
Breaking the biggest news of the month, if not the year, Facebook (FB) set the social scene ablaze with its March 25 acquisition of Oculus VR, valued at approximately $2 billion. A sharp turn in Facebook’s product road map, the purchase has pundits imagining all sorts of crossovers for the social network and virtual reality technology.
“The Oculus purchase further shows how Facebook will be obsessed with staying relevant by buying the next big thing,” says Paul Berry, founder and CEO of New York City-based social publishing platform RebelMouse. Through this and other acquisitions, Berry thinks Facebook will become a brand-holding company in the future, similar to Viacom or Hearst. “I see them, better than anyone else, using their market capitalization to create even bigger market cap for the Instagrams or WhatsApps,” he says.
But internally, Facebook may split over dueling objectives, says Michael Jones, CTO of Portland, Ore.-based Little Bird, a company that provides social influencer analytics and research. ”[Facebook] used to be a lot more fun and idealistic, and now that they’re public, there is extreme pressure upon that organization to grow up quickly and to monetize,” he says. This “great divide” will continue on for years, as half of the company drives toward generating revenue while the rest pursues the founding ideals of authentic engagement and connecting the world.
The above chart comes from data released by SNL Kagan earlier this month. It highlights the fact that, despite all of the ink spilt in recent years bemoaning the internet driven demise of traditional media, such businesses remain very, very profitable.
The most profitable “old media” business in America last year was John Malone’s Liberty Media, which among other assets, owns the Atlanta Braves major league baseball franchise; 26% of America’s fourth-largest cable provider, Charter Communications; and 27% of concert promoter Live Nation. (Although it’s worth pointing out the company enjoyed a one-off accounting gain worth $7.5 billion, after it changed the way it treats an investment in satellite radio operator Sirius XM on its books).
There’s a common thread between the rest of the top five (and at least half of the list): they produce and sell television shows and/or movies. 21st Century Fox is the company behind the eponymous network, cable channels (like Fox News) and Hollywood film studios; Disney makes nearly half of its revenue out of its media networks division, which includes the juggernaut that is ESPN; Time Warner owns HBO and CNN among other businesses ; Viacom is the company behind MTV, Nickelodeon and the Paramount line of film studios.
It is also worth pointing out that Google, by many definitions a media business (it makes most of its money out of search advertising) is more profitable than any company on the list. But among internet media (or so-called “new media”) businesses, it’s the glaring exception.
All the same, internet companies like Facebook (net income was up 4,600% in 2013) and Netflix (up 555%) are growing at a rapid pace. So it might not be that long before they are among the biggest media businesses—however you choose to define one—as well.