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Google may hit the ceiling. Relying too much on advertising, and not on users

10, 01. 2008

   Google Inc., which has just celebrated the 10th anniversary of its founding, is hitting the ceiling in its growth, some people say. Economic periodicals and other media are reporting that the company is "facing a turning point" as its share price has gone down by more than 40% from its peak. The company may be relying on advertising for earning revenue in disregard of users, but how the giant in the information industry will steer is unpredictable.

Share price down 40% from the peak

   Illegal video clips tend to be all deleted lately from YouTube, which Google took over. This is said to be because of the strong influence of "Video ID" introduced in October 2007. Copyright holders of TV stations sent in data of programming to YouTube, and the system of Video ID automatically find illegal video clips.

   Besides deleting, TV stations are capable of choosing to put advertisements on the sites of the web sites where the video clips are uploaded. By putting advertisements, they have the advantage of being able to measure the popularity of the programming and disseminate information over the world, which would be merits for marketing. For Google, it would gain recognition from TV stations and is succeeding in dissolving the minus image.

   The reason why Google is making such an effort is that it is aiming at making YouTube its source of revenue. Google has made a surprising progress as the biggest internet search engine. Since the beginning of 2008, however, its growth has become stagnant. Its share price fell surprisingly by more than 40% from the peak registered in the fall of 2007. As a company which relies heavily on advertising for most of its revenue, the company could not avoid being affected by the worldwide economic slowdown.

   The internet users are not responding favorably, however, to the efforts made by Google to dissolve its unfavorable image. In fact, voices are heard that YouTube has lost some of its attractiveness as a result of the deleting of illegal clips uploaded to it.

   Toshiyuki Inoue, journalist, has commented:

"Google seems to be aiming at collecting marketing data from YouTube by joining hands with TV stations. If the clips uploaded for front-side information become the main show, the illegal video clips for back-side information might be moved to community sites that are inaugurated by the net users on their own."

Key is to do service from net-users' perspective

   Google celebrated the 10th anniversary of its founding on Sept. 7, 2008, and newspapers and economic magazines are reporting that its growth may have hit the ceiling.

   The Yomiuri Shimbun daily pointed out in an article on its Sept. 8, 2008, issue that Google has not yet found a new source of revenue besides the search engine linked with advertising. It noted that the company is over-expanding to suffer problems peculiar to big firms and said that the company's growth story is overshadowed.

   The Weekly Toyo Keizai published a special feature article in its Sept. 27 issue, in which the economic magazine said that the No. 1 position of Google was threatened by the top U.S. SNS company Facebook, Inc. It said Google was facing a turning point characterized by "slowing growth" and "plummeting share price". The article expressed the doubt that Google could secure its dominating place and go up to a new growing stage.

   Google is trying to diversifying its business by developing the "Google Chrome" and mobile phone software and investing in renewable energy. Another issue facing the company is whether it can conduct business from the viewpoint of the net users without focusing its effort on serving the sponsors for advertizing.

   Inoue further said:

"Google is enthusiastic about offering to sponsor firms the users' characteristic marketing data shown on the Gmail. The users would be certain to feel unpleasant if they found out the data were provided only to the sponsors. If this would be the case, the users would neglect Google. This might be the problem facing the company from now on."

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