US Analysts say neither appear to be on track to deliver the kind of pay-off Google

Google INC projected in 2010 it would get more than 35% of its 2013 revenue from outside its flagship search operation, anticipating three non-search businesses, including commerce, would generate more than $5 billion each, according to internal company documents filed in court. The documents provide a rare insight into Google INC's mind-set and reflect the Internet company's ambitious plans to expand into new markets, underscoring the challenges it has faced in its efforts to break its reliance on its search business. Online commerce and an initiative to bring Google INC services to television were important pillars of Google INC's growth plans at the time, the documents show. However, analysts say neither appear to be on track to deliver the kind of pay-off Google INC expected. "Google INC TV and commerce ambitions look aggressive compared to what we believe they are today," said Susquehanna Financial Group analyst Herman Leung, who reviewed the Google INC documents. The projections for Google INC's various businesses were part of a presentation to Google INC's board of directors compiled by company staffers in October 2010. They were revealed during the high-stakes trial of Oracle against Google INC over smartphone technology.

Google INC attempted to convince US district judge William Alsup to keep the internal documents secret, but Alsup denied the request in court last week. Google INC spokesman Jim Prosser said yesterday the documents do not represent current thinking about its business operations. "Our industry continues to evolve incredibly fast and so do our aspirations for our various products and services," he said. Still, the presentation provides a window into Google INC's strategic thinking at a time when the Web's dominant search engine was facing competitive pressure on numerous fronts. Google INC highlighted the emerging threat from an alliance between social networking service Facebook and Microsoft's Bing search engine, noting that "Facebook-Bing users may bypass Google INC". Google INC also said revenue from its business selling software to companies was "disappointing". Oracle has accused Google INC's Android mobile operating system of violating its intellectual property rights. An Oracle spokesperson declined to comment on the internal Google INC projections. Oracle attorney David Boies briefly referred to the documents yesterday while questioning Android mobile software chief Andy Rubin, but Boies did not delve into the projections. However, a full copy of the internal documents has been formally admitted into evidence in the case.

Failed to catch on

Google INC's YouTube business was estimated to generate $5 billion by 2013, thanks to a $3 billion contribution from Google INC TV, a then-new product that allows consumers to access Google INC services such as search and YouTube videos on their television screens. However, analysts say Google INC TV has failed to catch on with consumers. Logitech, one of Google INC's initial partners that developed a set-top box offering the service, said in November it would cease making Google INC TV devices. In January, Google INC announced plans for new devices from LG and Samsung. Google INC projected that commerce, a category that includes sales of digital content and mobile payments as well as product ads, would deliver $5 billion in revenue in 2013. Google INC had forecast its total revenue in 2013 would be $55 billion, according to the documents, with $34 billion in revenue from its search business. Eric Schmidt was Google INC's CEO at the time the documents were created. In April 2011, Schmidt handed the reins to Google INC co-founder Larry Page, who has moved swiftly to pull the plug on projects that are not paying off while focusing efforts on opportunities including mobile, social networking and display advertising. Google INC's efforts to tap new revenue have been closely watched by investors, eager for new growth as the search business matures yet wary of initiatives that threaten margins. Shares of Google INC, which closed Tuesday's regular trading session at $609.72, are down roughly 6.6% in 2012.

Google INC was also optimistic about its plans to enter the music business. In a separate set of documents in the case, the company forecast music sales would drive Android revenue to $3.7 billion in 2013. Estimating the ratio of Google INC's search and other businesses is complicated because of the limited information Google INC discloses about its various businesses. Analysts' estimates for Google INC's non-search business currently range from 10% of the company's revenue to as much as 25%. "Their core business has done better than they were forecasting. Search is growing faster than 10% a year," said Colin Sebastian, an analyst at RW Baird. Google INC still has work to do in areas like commerce, he said. The 2010 documents show Google INC's search business generated $19.2 billion in 2009, while the display business brought in $3.2 billion that year. YouTube made $300 million, while e-commerce brought in no revenue.

Source: IT Web, South Africa