Peak Google? Chocolate Factory cuts costs amid dwindling growth Google is curbing staff recruitment and introducing a number of penny-pinching efficiency practices to try and gets its profit growth back on track, according to reports. A number of recruiters, venture capitalists and employees told the Wall Street Journal the Chocolate Factory is casting an increasingly critical eye over its …
What do they expect? Massive year on year growth in perpetuity? Oh yea, it's shareholders we're talking about....
Exactly. "Analysts and Investors" need to get a grip on reality. Not only do they seem to expect year on year growth, but they seem to expect that the percentage growth should increase every year - something which is unsustainable and completely unrealistic for a mature company.
There is absolutely no control on who uses what and how.
Have you been to the Chocolate Factory corner of Silly Valley lately? Free food (not even checking badges), free coffee, even free car oil change for anyone who walks by.
Now, I am all for building the bright communist future, but that is no way to run a company.
"Well, they don't seem to have been doing too badly..."
For themselves, no. But having never paid a dividend to shareholders, you have to wonder for who the company is being run. Shareholders wealth has increased purely as the stock has inflated, and absent QE it would be worth a fraction of the current price.
Real companies make real profits, generate real cash, pay real dividends, and invest in real opportunities. Google's missing from most of those categories, and the whole business will shrivel when the near monopoly on search is broken.
"Free food (not even checking badges), free coffee..."
OK so how much would charging a few dollars a meal bring in as a percentage of turnover?
And what would the resulting PR impact be on the Chocolate Factory Myth as being a whizzo place to work? Impressionable 20+ somethings with sneakers will still be needed in numbers I imagine.
Other areas of the business are also yet to make a profit. YouTube's revenue increased by $1bn (£644m) in 2014. But after paying for content and the equipment to deliver speedy videos, YouTube’s bottom line is “roughly break-even,” a source told The Wall Street Journal earlier this year.
If that was MS they would can the whole division
Those of us old enough remember a time when IBM and Digital were the Apples and Googles of the day. Sane thing goes for Sun Microsystems and Microsoft in the 90s. These companies may not have had indoor playgrounds for all the recent college grads or infinite free food, but they did go into a phase where they grew to a massive size and paid people extremely well. IBM nearly died under its own weight in the early 90s when they missed the mainframe-to-client/server shift. Microsoft is now all about squeezing nickels out of every corner of their business, when they basically used to run a fully self-sufficient programmers' dorm complex. Sun got eaten by Oracle, but before that they were beyond massive. Before the ill-fated Compaq merger, Digital was one of the best places to work in technology compensation-wise. I sometimes think it would have been cool to be about 15 years older so I could have cashed in at a tech company that produced actual products instead of a social media startup.
One key thing about all of these examples is that the companies involved have a niche that they can't be unseated from. IBM still has the mainframe, allowing them to paper over the disaster that is the rest of the business. Sun was "the dot in dotcom" and built out a lot of the dot-bomb data centers with VC money. Apple basically has a printing press cranking out $100 bills in the basement; they have millions of rabid fans paying massive margin on cheap-to-make hardware, and they get a 30% cut of everything these rabid fans buy. (That said, Apple has been pretty quiet in terms of Silicon Valley excess, unless I'm missing something.)
A good rule of thumb is that this new phase happens when new headquarters get built or moved into. (Isn't Apple building a new building?)
@Erik4872 - I'm not sure that the mainframe will save IBM, and I'm not sure IBMs management think that either. I think they are betting on software, as long as it's the right software and cloud (which system z may still play a role in though)
IBM is of course at the cutting edge of nickel and dimeing its own staff and business. While Google certainly needs to get a handle on its cost base, it should treat IBM as a cautionary tale. If IBM were a country, it would be Greece: it's done some very impressive things in the past, but it's currently trying to cut itself to growth, and absence of success in this endeavour is only met by more cutting. Except of course IBM is doing this to itself, whereas Greece hasn't really got much choice. So Google - cut back on the more costly hubris but whatever you do don't take any tips from Big Blue...
It was one of Parkinson's Laws, roughly:
When a company or other organization is finally able to plan and build the perfect building for itself, the building best suited to its needs, that organization is in the throes of petrification and death.
Well worth a read even though over 50 years old now.
The funny thing is, in 1990, I worked in an IBM building, which IBM built for itself, back around 1967. It even had its' own on and off ramps.
The history of that building was itself hilarious. IBM designed and built the thing for itself, because no one else would ever need, or could use, such a custom-built place, except a company that matched IBM need-for-need.
Of course, owning it, they paid monstrous taxes on the place. So, they sold it. No one would buy such a monstrosity, so IBM, as the story goes, promptly funded a realty company, which bought the building, and in turn, leased it back to IBM. IBM, now leasing, happily writes off the lease. But eventually it tires of the huge leasing fees, so it buys the company that owns the building, allowing it to, err, lease it's building to itself, with several layers of writeoffs existing between IBM the owner of the realty company, and IBM the rent-paying tenant. Said story was told to be by a long-time IBM accountant who felt IBM's success was not solely attributable to their engineers (who he admitted were top notch), but their legal and accounting team, of which he was a part. The difference between engineers and accountants at IBM, he said, was that engineers were expected to be conservative, and accountants were expected to be creative.
I'm not entirely sure he was kidding, or wrong.
In any event, if IBM was in its' death throes when it planned that building, it's a pretty spry corpse 58 years later.
I think google has hit the limit of how much revenue you can squeeze out of purely advertising supported revenue model. People have become desensitized to adverts and mostly choose to ignore them. The market is still there, but I think it's about time that google should offer premium paid for advert free services with a few killer features only available for paying customers. One of the killer features will be that the paid for customers will not be used for data mining for advertisers. There can also be some functionality related features only available to paying customers. These features should be targeting power users.
I have a feeling this is what they were aiming at with Inbox. Not a single advert in site, I was honestly expecting they will start charging money for it once it was out of beta phase
...is that the things being advertised have to themselves be profitable (eventually) in order for Google to skim a percentage.
Some of us remember Web 1.0 and the race for "eyeballs" where, to put it in modern equivalents, it was as if Google made money from ads for Facebook which ran ads for TechNews which ran ads for some VC-funded startup whose business model was to garner "eyeballs" that it would at some future time somehow "monetize"... and nobody was making anything that anybody was actually buying. It was a Fool's Gold Rush, and Cisco was selling the shovels. Great times...
Anyway, Web 2.0 is a lot like that with the additional pixie dust of "crowdsourcing" and "user generated content" -- or as oldies like to say, "making money off of other people's work". Unless somebody is actually making something of more value than Tinder or Grindr or Mumblr, it has a hard stop sooner or later.
Some of us remember Web 1.0
Some of us remember PointCast, which was going to monetize everything in site, by taking over the user's desktop, and getting rid of that silly voluntary browsing, and making the users see what the advertisers wanted them to see. You know, like how it works with television, where people watch six hours of continuous commercials and can't leave the room.
When that failed, the next up was the "free PC" era, where people who couldn't afford PCs were given free ones, which were locked down, and their browsers forced them to watch a mandatory number of adverts when browsing. Which technically worked, until some sod realized that people who don't have enough money to buy a PC of their own were perhaps not the idea target market. A friend's sister had one of these, and was apparently irritated that "none of the ads are for anything I could afford even it I wanted them". The feeling was evidently mutual, and the program eventually ended.
Good times, good times.
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