Earlier this year, recruiters from Google Inc. went out looking for seamstresses and balloon engineers.
It was an odd set of professions for a company that runs the world’s most popular Internet search engine – even one that receives, on average, 5,000 job applications a day. Many of the men and women approached by Google were not told why they were being hired, but they signed up anyway. “We get people who want to work on the next big crazy thing,” says Todd Carlisle, Google’s director of staffing.
The next big crazy thing, in this instance, is called Project Loon, an audacious plan to send Google balloons into the stratosphere, where – if all goes well – they will beam down wireless Internet signals to remote and rural communities with poor access to broadband connections.
Launched this June with a pilot project in New Zealand, Project Loon appears on the surface to be another “moonshot” – the Google term for highly experimental projects that will either become industry-changing success stories or total failures.
In fact, it fits perfectly with the evolving strategy of Google, a business that has done more than any other to change how people find information and do business. Having disrupted one industry after another – from mobile phones to television to advertising – Google is now out to blur the lines between the digital world and the physical one. From phones that answer your plain-English questions to cars that drive themselves, the company that started out with a mission to organize the world’s information is now trying to automate and simplify your daily interactions.
Behind all this experimentation and innovation, there’s a serious business purpose. At 15, Google has reached middle age for a technology company. It remains the biggest success story of the Internet era; so far, no competitor has been able to mount a serious challenge to its dominance in web search, on every platform. This year, it is expected to earn $12.7-billion (U.S.) in profit, and it has already become the third most valuable corporation in the United States behind only Apple Inc. and Exxon Mobil Corp. and surpassing, yes, even Microsoft Corp.
For all its profitability, though, Google still relies on one business – advertising – for about 85 per cent of its revenue. Search advertising remains lucrative, as the company continues to post double-digit percentage revenue growth. But there are signs that the Internet advertising business is facing long-term challenges.
Last week, Google posted better-than-expected third-quarter earnings, with revenue of $14.9-billion, sending its stock price soaring past the $1,000-a-share mark. The solid results masked some troubling trends. Google received a large boost in ad volume, which itself was due to a surge of mobile advertising, the ads that appear on smartphones and tablets. But while such ads are quickly becoming a major portion of all Internet advertising, they tend to generate less revenue.
In the most recent quarter, Google said a key metric called cost-per-click, which measures how much advertisers are willing to pay for an ad, declined 8 per cent year over year. That marked the eighth consecutive quarter of cost-per-click declines.
Put simply, the ads at the very heart of Google’s business model for the past 15 years are slowly losing value, and no company has figured out how to reverse that trend.
For many investors, the issue of declining online advertising rates is perhaps the only worrying omen for what is otherwise one of the most successful companies of the past two decades. In the context of huge profits, the company’s experimental projects, such as the Google Glass wearable computer or the self-driving car, have often come off as a kind of sideshow – a series of wild ideas that, at best, have an unclear path to profitability.
At the Google campus in Mountain View, however, there’s a sense that virtually all these projects are part of a wider, more ambitious effort by the company to expand its role as the chief middleman of Internet search into a variety of other areas. That takes new technology, a stomach for risk and big ideas.
“The unifying theme at Google, other than it being a startup run by [CEO] Larry Page, is the bigness of it all,” said Steven Woods, director of engineering at Google Canada. “It makes huge bets in areas that can be dramatically impactful in the future.”