Google profits cheer investors but experts still sceptical about Google +

14th October 2011

The firm saw net income of $2.73bn (£1.73bn) for the three months to 30 September, from $2.17bn a year ago. Net revenue, excluding payments to partner websites, surged by 37 per cent to $7.51bn.

Income from the UK was just over $1bn.

The Guardian quotes Needham analyst Kerry Rice calling the results "nothing short of phenomenal".

For those who want to take a closer look at the firm's results, here is the release from Google's Investor relations site.

But website Techcrunch – and nobody's patsy – suggests the Google chief is getting a little boastful though the graph of quarterly revenues since 2009, suggests he has some reason to be.

The site notes that: "A lot has happened for Google during this quarter, namely its bid to acquire Motorola and pickup and public launch of Google's social product Google+. The company presently has 31,353 full-time employees and $42.6 billion in cash."

It is not just Facebook that Google is facing off against. Here website Media Decoder says that Google is planning to open a MP3 player store suggesting it has its eye on Apple as well.  

The website writes that "Five months after it introduced a cloud music service with limited capabilities, Google is in negotiations with the major record labels to expand that service and also open an MP3 store that would compete with Apple and Amazon."

There are however sceptics particularly about that tricky Google + initiative – the strategy that seems to be most aimed at Facebook.

Larry Page says Google + has 40 million users. But website Search Engine Land isn't impressed.

Noting that Facebook's active users are around 800 million and Twitters are 100 million, Danny Sullivan adds: "How about the 40 million figure that Google released today. Those are simply the number of people who have signed-up for Google Plus, the company tells me. It's not an active user figure. More accurately, it would be called the sign-up figure. Some of those will be active. Indeed, millions will have signed up within the past month, when Google+ opened to anyone. The mere act of signing up would make the active, at least for a bit longer. But not all of them. What is the active user figure for Google Plus? That's not something Google's giving out, right now. That means going forward, until you hear the word "active" next to a figure that Google provides, don't use it to measure against the active figures given out by its competitors. It's just not accurate."

And Minyanville reports on an unfortunate leaked missive from a Google + engineer Steve Yegge that reads as follows – "A prime example of Google's complete failure to understand platforms from the very highest levels of executive leadership," The Google+ platform is a pathetic afterthought".

Markets, though, don't appear too worried. Reuters quotes analyst Colin Gillis of BGC partners in even more upbeat mood. He says: "Christmas came early for Google shareholders. It's all about the core business. You drive that extra revenue and expense becomes secondary. It was a great beat on the bottom line. It's not necessarily because they are controlling expenses. It's because they are driving more revenue."

More from Mindful Money:

Facebook: The company other giant technology firms really fear?

Social media: where should you invest next?

Google chairman admits he ‘screwed up’ over Facebook

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46 thoughts on “Google profits cheer investors but experts still sceptical about Google +”

  1. JW says:

    Hi Shaun
    Of course we are in a depression, on current policy , one that will last a long time as the quite deliberate reduction in real wages reduces living standards by 30% from peak. The alternative as you say is to attack the banking crisis head on , which will result in enormous losses for bondholders. So either the 1% or the 99% suffers most, unsurprisingly all policies across the western world , be they QE or austerity are designed to protect the status quo.

  2. Roy says:

    “The correct response is to reform our banks and end our zombie banking problem[.]”

    Well that’s just never going to happen, is it?  When have you heard anyone connected with government even hint such a thing is in train?  

    Besides, even if it worked, it wouldn’t.  At least not for a generation.  And although that generation is already eligible to be burdened with taxes when its time comes, it doesn’t get a vote today so it doesn’t matter.

  3. Ray_Fletcher says:

    Hi Shaun, I understand the data is “preliminary” so we can expect the usual manipulative re-manufacturing of figures in the next few months….”well, we can’t allow the sheep to really know what’s happening” (sorry but disgusted with politico’s trying to placate us…)

    1. Hi Ray

      The first estimate of GDP growth comes from the core basic elements and has about 40% of the data that will be in the final one. It is not fair to say that it is only 40% accurate but it is fair to say that the media’s assumption that the error range is 0.2% is too low.

      Right now if you look at the surveys then if they are right the numbers will be revised up by much more than 0.2% but of course that is an if…

  4. Zak. says:

    “The correct response is to reform our banks and end our zombie banking problem as soon as possible,”

    … but how?

    How does this actually occur in such a way that we aren’t still in the mess we are currently in another 10 years time. The sums of money involved are enormous and thus so is the problem.

    I keep hearing this argument Shaun (and I’m certainly not saying you are wrong) but I wish you would use your blog one day to spell it out for us, step-by-step?

    Personally, I just cant see any way out.

    1. Hi Zak

      I knew I had blogged on the subject and have just looked it up. Here is the link to it.

      1. JW says:

         OK Shaun, re-introducing G-S is the right move. But what about all the existing bad stuff on and off balance sheet. Dealing effectively will mean enormous losses for some, how do you stop that just being dumped on the tax-payer  like whats happening now?

        1. Hi JW

          I cannot give you a precise answer because we do not know what the losses are! However I do expect them to be larger and possibly much larger than what we have been told.

          I do however have ways of getting non-taxpayer money and it would start with shareholders  definitiely at RBS and probably Lloyds as I fail to see why taxpayers should in effect fund the share price. Next up would be bondholders who would have to take their place in line.

          As you go through that cash you reach a scenario where the Bank of England could help with liquidity for a time.

          Whilst that is being done I would also strip out the whole managerial/target culture at the banks. I have seen it in action and it leads to great waste.

          So there is no guarantee that the taxpayer wont get a bill but we are massively exposed as it is to a bill that is probably getting worse. We need to clean it up.

          1. JW says:

             Shaun I agree that its only worth paying the bill if we create something better. The problem most of us have, is that a few with power only want ‘better’ to apply to them.  They throw sufficient crumbs to enough people to keep that power intact. So the world consists of many of the ‘majority’ fighting each other for some of those crumbs, we forget they are only crumbs.

      2. Zak. says:

        Thanks for the reply Shaun and I do remember reading that post at the time. However, you only start to answer the question of banking reform by suggesting a full audit of the banks…

        I think we all know that such an audit at present would reveal some truly shocking problems (hence the need to hide them in the first place) that could quite easily collapse the whole financial structure of the banking system without taking any further action at all.

        But this aside… what then? You’ve done your audit and revealed the whole (or should that be hole) dreadful mess and then what…?

        You can change the rules and shuffle the pieces around as much as you’d like but thats only a remedy for the future of banking as far as I can see. What about the mess thats still in the here and now? Who pays to clear that up?

        I’m asking because nobody I speak to seems to have an answer. If we bail the banks out, then thats apparently wrong but if we dont bail them out and they ultimately collapse then we end up paying in any case. So whats the answer?

        1. Hi Zak

          I have given some more detail in the answer to JW above.

          However I will add one more point of detail. You say “we end up paying in any case.” I cannot guarantee no further bills but my view is that you can cap them and stop them growing. I believe they are growing right now.

          In addition we would be making a new start rather than sticking our collective heads in the sand and it is amazing how much progress can be made if you do that. For example Iceland..

  5. Patrick, London says:

    Another interesting set of facts and analysis, and amidst the mostly unsurprising bad news, some potential positives to consider.
    Have you sent an application in to the BOE?

    Apologies if this comes across as a bit of a hijack, but your insight has real value!

    If we have this target of 2.0% for Growth, I’d love to know how the ‘wealth’ generated during this time has ultimately been distributed. 
    Was capitalism always going to result in a situation in which those who generate (or appear to generate) the most money then earn the most money, irrespective of effort, as opposed to it specifically being based on hard work and genuine entrepreneurial endeavour. Hard work and wealth really don’t seem linked any more, if they ever really were.
    Hard work is certainly a major factor in avoiding degrees of poverty, at least in those regions not suffering regular natural/socio-political-economic catastrophes, or subject to limited natural resources. 
    The people least suited to govern us, seem invariably to be the only people who actually manage to end up governing us. The people most likely to thrive within a capitalist market place, are those that are most willing to compromise any rational social morality on their way to success. The roads to political and entrepreneurial success are littered with those individuals; whose moral compass actually forced them to turn around and flee the inevitable compromises their future success would’ve demanded of them. In the end, our social evolution is perverted, as it is not the ‘fittest’ that survive, but the most ruthless and the least moral.
    As for the the philanthropic aims of the planet’s wealthiest, I don’t know whether its conscience or ego or tax. Perhaps for some it was the aim all along… to be so wealthy to be free of almost any societal or government intervention, circumventing it to ‘do good’ on their own terms.
    What I’m getting at is, even with your need for fundamental banking reform, are we too far gone with the disparity we have, and the excesses available to the few, to have the required cultural shift to develop (or return to?) a healthy capitalist system that allows all of us that work hard, innovate and evolve to receive an equitable share of that 2.0% growth?

    1. Critic Al Rick says:

      Hi Patrick, you have certainly ‘hit the nail on the head’ for me once again.

      Unfortunately, I do think the West has gone too far down the route of zombified self-perpetuating self-destruction to do a suitable U-turn. I don’t envy the generations following mine.

    2. Hi Patrick

      I do not think we have had capitalism as we have had a type of crony capitalism that at it worst has led to what has been inflicted on Ireland where bad decisions by so few have affected so many. So the capitalism case is unproven..However it leads to the question of whether via human nature capitalism has to become crony capitalism.

      “The people least suited to govern us, seem invariably to be the only people who actually manage to end up governing us.” This is a big problem with our democracy and I can only completely agree with you here. I think we will need to elect people for specific roles and use referenda too. This is reflected in my view that the MPC should be elected.

      No I do not believe that we are too far gone to reform but there are considerable barriers to it.

      1. Patrick, London says:

        Richard Dawkins and others have written about how our morality evolved as a meme, how trust became essential to our growth. PR/Spin/Obfuscation/advertising have all risen to cloud our sense of trust. All four are essential to modern capitalism.

        The Ian Hislop documentary about philanthropic bankers that the BBC showed a while ago, was depressing when it seemed to reveal that those bankers that were being guided by a moral hand, were guided by a religious belief. Quakers in the most part. 

        As an atheist and, antitheist, it is so depressing to think that Religion and adherence to dogma, may have been our only way of managing the risks inherent in capitalism. Free market or crony.

        1. JW says:

           Patrick, there is nothing ‘free’ about the ‘free market economy’. Capitalism with no moral framework is akin to the ‘law of the jungle’.
          Evolution tells us that the strongest survive and even prosper when ‘natural’ competition is allowed free reign.
          As a species , do we want that natural selection process to have the upper hand by allowing economic/political environment that encourages it? Can we afford the checks and balances to that process that make human life for the majority more bearable?
          Increasingly these sort of fundamental questions need answers.

        2. Hi Patrick

          Your reply got me thinking and I have asked the Treasury Select Committee how one to apply for the post of Governor of the Bank of England. I will let you know how this develops…

  6. Spacemanc says:

    The reduction in wages can’t all be bad for the economy – surely it helps business become more competitive which should eventually lead to more exports and more employment. 

    It’s not a popular thing to say, but we’re overpaid in this country and a lot of the increase in wages over the last decade was funded by borrowing and fuelled by the public sector. That was obviously unsustainable and it had to change. 

    Considering the massive changes to the economy and the large cuts in the public sector starting to hit, I’m actually impressed that the figures are so good and that the government has achieved it without riots!

    1. Hi Spaceman

      There are some good effects from faling real wages in terms of price competitiveness. However it is a real hard grind if you do not have reforms and productivity increases.

      The real problem for Bank of England policy is that unlike me they did not believe that cutting interest rates to 0.5% and indulging in QE would cause inflation. They expected real wages to remain positive and genuinely thought that they were “firemen” quelling the crisis to quote the Evening Standard on Adam Posen.

    2. Patrick, London says:

      First, who is the ‘we’ that are overpaid, and second, compared to who/where?

      Are you thinking that our working class need to find a way to be wage/cost competitive with rural India & China, Philippines, Vietnam etc.

      Is it a supposed middle class, saddled with increased taxation, inflation and increasingly delayed retirement?

      How is the UK to compete with child labour, inhuman labour laws, and non existent health and safety policies?

      I think there is certainly an argument in looking at administration and bureaucracy cost in the public sector. I think the clearest problem is how the wealth ‘we have’ as a nation is held in the fewest hands. How remaining assets are being picked up by foreign money. How our privatised utilities are owned and run by other countries.

      In addition, while I have always valued immigrants and what they can bring to the country, Significant caps and/or reductions are long overdue.

      Finally, I sincerely believe that the BTL money machine has to be aggresively slammed in reverse.

    3. Anonymous says:

      We need to be overpaid in order to afford our overpriced rents and house  prices! Absurd of course – why can’t more people see this?

  7. ChrisLongs says:

    Your analysis still indicates the disconnect between BoE/MPC and what I call the real economy  of wages, mortgages and food/energy prices. HMG is still pushing on a piece of string – true capitalism would have crushed the banks and allowed  a economic reset. QE life support for the banks means flat lining for them and slow decline for the rest!
    Await political spin with interest but unfortunately no political party seems to have a clue!
    Steve Keen has suggested mortgage limits linked to rental equivalence and shares  after trading  7 times with time expiration of 50 years as potential counters to asset bubbles.
    Perhaps debt forgiveness in 2008/9 would have been cheaper than bailing out the banks?

    1. Zak. says:

      “Perhaps debt forgiveness in 2008/9 would have been cheaper than bailing out the banks?”

      Hi Chris,
      And what would you have done for the savers in 2008/9 ?
      I rent and have always chosen to for the last 30 years. I have a few quid saved for my retirement and I am quite happy with what else I have. But I’ll be damned if I’d sit by and watch my tax pounds be handed out to so-called “Homeowners” just because they chose to borrow the wrong sum at the wrong time!
      Unless ofcourse you mean “Just give the keys back to the bank and lets forget the whole thing ever happened” kind of forgiveness? But I dont think anyone would support that as a measure. 

    2. Hi Chris

      I believe that if we had reformed the banks rather than bailed them out we would certainly be on the way to a better future and would probably already be better off.

  8. James says:

    The truth is that we are all poorer than we thought we were a few years ago. it is manifesting itself in all sorts of ways, from declining real wages to longer working lives to a declining pound. We borrowed our way to thinking we were rich, either through crazy bank lending or profligate government spending. We are now faced with an almighty mess, made worse by the inability of the political class to spell out the problem. This forces them to take not the best approach, whatever that is, but the line of least resistance (QE, inflation eroding standards of living slowly etc)

    1. Hi James

      the danger is that they make in worse and in some respects I think that the “kicking the can in the future startegy” has made things worse.

  9. MickC says:

    It is utterly incredible that Japan having shown what happens by supporting zombie banks, “the West” has done the same-less Talking Heads, more The Vapors (Turning Japanese).

    Incidentally, as a (currently “between jobs” property lawyer) there is no pick-up in commercial property-certainly outside London. Who in their right mind would take on a liability to pay rent, come what may?

    Most office/industrial/retail property outside London is struggling to wash its face.

    1. Robert says:

       Mick hi

      As a Surveyor, I totally agree with you….there is very little activity outside London, either on the buying/selling of investments, or on letting vacant properties. look at the increasing number of empty retail units, especially outside the South east.

      I can’t really see this changing in the immediate future, although maybe banks will try and offload some of their properties at some stage this year.

      1. MickC says:

        Thanks for your reply.

        I can’t see much take up for the “product”-apart from “vulture” funds-and individual investors.

        The difficulty is that most “institutional” investors (i.e. those hobbled by the “rules” of such investment-long leases, good covenant and all that shite) have to comply with the similar requirements of their funders. The ones who don’t can do well -but they are few and far between.

        There are some Jewish investors (no. thats not racism, its realism-don’t get me started!) who have access to funds where cashflow is king (when isn’t it?-err,when tick box takes over from economic reality), but nowhere near enough to support current “values”.

        What should happen is that the banks should support those investors who have a track record of meeting their obligations (never mind that what they invest in doesn’t tick the boxes), because tey are the ones who can get cashflow.

        Will it happen? Yes, about the same time I become King of England.

        1. Hi Guys

          If I can reply to both of you in one go I do have a refinement. i met someone this eevning who measures such activity and he told me that he felt there had been more work. However it was refurb and renewal work rather than new builds.

          Does this fit at all with your own experiences?

          1. MickC says:

            Not so sure on that. Refurb and renewal would indicate that there is a need to do so i.e. a tenant/end user which is contrary to what I hear.
            Depends whereabouts he is measuring-the London market presumably.

          2. Robert says:

             I would also agree with Mick.

            I haven’t seen any increase on refurb/renewal on commercial property…in fact quite the opposite. Anyone now has empty rates to think about so many High Streets are being killed, and alternative uses have to be considered.

            I talk all the time to agents of all varieties, and there is simply very little happening right now, especially outside Central London and the South east.

  10. Anonymous says:

    Hi Shaun
    I see exports to non-EU countries deteriorated badly between Jan / Feb : Cars -16%,capital goods -9% and food etc -7%. On your point about public borrowing I see that weirdly government and other services drove growth in first quarter output and the average earnings in the public sector remains above that for private workers…… The silver lining appears to be that total wage growth in financial and business services was flat due to year on year falls in bonuses. The ONS have some very bad news for the BoE on inflation – stripping out VAT effects ” there has been little downward trend in inflation”…….

    1. Hi Shire

      How many times have we discussed these points. Rebalancing of the UK economy or rather not! And inflation disappointing the Bank of England and me but for different reasons!

      On the subject of central bankers and inflation I note that Chairman Bernanke of the US Federal Reserve called it “transitory” tonight which at least is a change on temporary.

      As to “The silver lining appears to be that total wage growth in financial and business services was flat due to year on year falls in bonuses” do you not have the horrible feeling that they have found a way of escaping the income tax net? I know I do.

  11. El Nino says:

    I believe the song was “Road to Nowhere”.

    There is a line “Takin’ that ride to nowhere” and, of course, “We’re on a road to nowhere”

    Keep up the good work, Shaun.

    1. Hi El Nino

      Ah thank you I see it now! You have explained a conundrum.

      I was contacted on twitter by a fan of them saying she had enjoyed my blog but thought it was road to nowhere. Of course it is and it shows that when you write a blog you can get word blind and not see what you have written but rather what you think you have written.

      I will change it.

      1. MickC says:

        There is a line in the song which says “ride to nowhere”-but the title was “road….Great song and lyrics anyway.

  12. Richardofbirmingham says:

    Is the MPC right to be so obsessed with avoiding deflation to the point of wanting to stoke up inflation at a time of static or falling wages. Maybe instead of looking to the 1930s for solutions it should consider the progress of the depression of the 1870s. The ( theoretical ) assumption that UK consumers will hold off spending if prices are falling may need to be tested.

    1. Hi Richard and welcome to my part of the blogosphere.

      In my opinion the MPC is wrong to treat disinflation with terror and inflation with contempt. If disinflation- negative inflation- was so bad then Japan’s economy would have collapsed some time ago. She has problems yes but inflation also brings problems as the MPC as discovering with the way real wages have been forced into negative territory.

  13. Anonymous says:

    Athens burns, Spain implodes in slow motion, UK in second recession with no growth in between, resurgence of anti-foreigner anti-rich populists across the continent.  How much more evidence do we need? 
    The question is why has it taken FIVE YEARS for people to start asking this question.  It was obvious by late 2007 that this was less of “your parents’ recession” and more akin to “your grandparents’ expeirence”.The scale of the hope and denial, after five years, are surely indicative of the degree to which we collectively took leave of our senses – and that we have still not fully understood what is occurring.

    1. Hi Sneakus and welcome to my part of the blogosphere.

      I can only speak for myself but you will see that I have been arguing against many consensus views since I began this blog back in November 2009.

      As for Spain she has just been downgraded by S&P and as for the reasons you only need to look back at my recent output on her.

  14. Gold Bug says:

    Of course it’s a depression. A compressive, deflationary de-leveraging  depression caused by real growth being replacing by debt fuelled consumption and ended by peak debt and peak oil. As long as governments block market adjustments and continue to increase regulation and spending there can be no realignment of the economy to take account of the new reality. Things will get much worse before they get better.

    1. Hi Gold Bug and welcome to my blog.

      I imagine everyone can guess your alternative suggestion…..

  15. Charles Jurcich says:

    The reason why the banking interventions are not included in the debt figure is because the debt was issued, but almost all the money raised was never spent – it has been kept back to repay the principal. So the treasury is on the hook for the interest payments only, plus that portion that was actually spent bailing out the banks – much of which we will get back.

    1. Anonymous says:

      Hi Charles and welcome to my part of the blogosphere.

      You have locked yourself in a conundrum with your opening sentence because if you issue debt then surely you have to count it! Or are you going down the route followed by so many on inflation where you exclude bits of it?

      Actually I think you will also find that we took over the responsibility for bank debt rather than issuing new debt.

      If we move onto my views they are that if you take on responsibility for loans they become part of your debt. As that is what the UK has done then it is part of our debt and therefore I count it. In my opinion you implicitly admit this with you “much of which we will get back” well how much? And the bit that we will not why isnt it in your debt calculations?

      Should we move in to an difficult economic phase your method of counting will make our debt numbers rise in an unintended consequence as you have to face admitting more and more of the money will not be repaid….

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