Scale at speed: Google is running the world’s biggest startup

Four years ago there were no Chrome users in the world. Today there are 750 million. There are over 900 million Android phones in the world today. Five years ago there were none.

That’s what awesome looks like.

How does that play out in the real economy? Here is one example: more than 50 billion apps have been downloaded from Google’s Play store, and already this year the company has paid out more money to Android developers than it did in all of 2012.

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(Image: Google CEO, Larry Page)

With hindsight, Android and Chrome where no brainers, at the time they were big bets” according to CEO and co-founder Larry Page.

He made his comments while speaking to analysts at the company’s Q2 earnings call. The full transcript is available at SeekingAlpha.com.

Google’s success has become so expected, its influence so pervasive, that its earnings miss produced something akin to a jarring note in an otherwise familiar symphony. That’s not entirely a bad thing, since it’s good to be reminded how hard this stuff really is.

Google is transitioning its audience from the desktop, where yields are higher, to mobile — where (for now) yields are lower. The miss, in that sense, was itself a little predictable.

Still, by Google’s standards, Q2 was an uncomfortable reminder of the mundane idea that owners like a return on their investment — when you can manage a break from reinventing the world.

The interesting thing this time, however, compared to the last earnings call, was the enthusiasm of the money men for some of Google’s more “non-core” initiatives.

Perhaps Page’s entreaties from previous presentations have finally got through to the Zegna ensemble. This time the finance folks were hungry for detail.

And Page, of course, was happy to oblige.

Asked by Sanford C Bertstein and Co’s Carlos Kirjner why the company wasn’t investing more to capture new opportunities Page said, “I think that’s our main job — to figure out how to invest more to achieve greater outcomes for the world [and] for the company.

“I think those opportunities are clearly there.” But he stressed the importance of execution and velocity, saying “It’s pretty easy to come up with ideas, it’s pretty hard to make them real and get them to billions of people.

According to Page, technological innovation at scale is what sets Google apart. “I wish we could just snap our fingers and accomplish that [but] it’s actually a lot of hard work.” Google is constantly addressing its processes, leadership and organisation to aid acceleration, he said.

And there was an interesting insight into just how long some ideas take to incubate inside the Wacky Chamber in the dungeons of Mountain View. Last month the company — quite literally — launched a new initiative called Project Loon, aimed at delivering cheap wifi from balloons on the edge of space. Yet Page pointed out that Project Loon was an idea that he and co-founder Sergey Brin had been thinking about for over a decade.

Maintaining an entrepreneurial culture — thinking small in a big world, basically — is something that occupies the CEO’s imagination, as was clear from his response to a question from Barclay analyst Anthony DiClemente: “These projects always start with a small group of people,” he said. “They’d start with one or two people and then ten people and so on, and those people can get a lot of things done.”

According to Page, predicting which of these ideas will be commercial is difficult. “The question I always ask is, why aren’t you doing it today? So we try to reduce whatever roadblocks that we can, take anything out as quickly as possible.

Oh right, the numbers …

Google’s second quarter revenues where up 19 per cent to $US14.11 billion. This time last year they were $US11.8 billion.

Its net revenue was $US11.1 billion, compared to $US9.2 billion a year ago, and it delivered net income of $US3.23 billion or $US9.54 a share ($US8.42 a share last year) — which translates into $US9.56 a share once stock options are excluded.

But it is all about expectations. Shares fell four per cent after the results were announced, and they have drifted down a little since then. Still, it’s best to keep a bit of perspective, as this Nasdaq chart of the stock’s past 12 months attests:

(Google’s 12 month share price trend. Source: Nasdaq)

One final point. Since 2007 Google — like all of the other great and emerging Internet businesses — has been operating in core markets whose economies are basically compromised and depressed. Just imagine what its numbers will look like when the cycle turns and the economy kicks back into rude health.

The Age of the Dotcoms is just beginning.

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