This graph invites some pertinent questions. For instance, it suggests that their search revenue growth went linear sometime in 2020 and might be going asymptotic as of the last year. So I want to know what happens there over the next several quarters. Is the current quarter anomalous, or do deferred payments always make it look like that?
Second, is the geometric growth of Cloud cannibalizing their search teams, leading to less effort being put into sales. And so it’s not so much that demand is tapering off as that supply is being constrained as an opportunity cost. That $1m in salary nets more profit from Cloud than from Search.
As a power user of Google search for decades, I find myself using it less and less (maybe now 5% of my historical peak usage). There are several reasons, but the main one is because they have gradually traded search quality for ad revenue with the direct consequence being wasting my time.
If I type in the name of a company so that I can navigate to their website, and I have to scroll past my whole viewport of other companies bidding to be placed above where I'm trying to go, I learn it's faster for me to just type the website address into the bar instead of going via Google.
They designed a UX that made my life easier and caused me to form a habit, and then broke that UX for money causing me to form a new habit.
It's just one example of dozens, but the consequence is that I see 95% fewer Google ads than I used to. My guess I am on the leading edge (along with many others on this forum) of a wave of change of user behavior that spells pessimism for Google search revenue.
> I learn it's faster for me to just type the website address into the bar instead of going via Google.
It pretty much always was, assuming you type reasonably well anyway. Especially once browsers just started guessing at what you want by automatically adding "https://" and ".com" to whatever you type into an address bar and trying that before redirecting you to a search engine.
It is unfortunate and only sometimes sustainable to alienate a third of your user base to extract 2x as much money from the rest for a net 30% increase in short term revenue. It’s not repeatable usually.
I'd assume Google leadership weren't unintelligent, looked at the trends, and decided maximizing search revenue per user was more advantageous than search quality.
E.g. how Amazon knows they have a problem with counterfeits and low-quality copies that damages their brand, but chose volume over quality
Neither company will ever explicitly put it in those terms, but it seems obvious Google isn't looking at search as a growth engine anymore.
It’s not a judgement of intellect but of character. Those people were forced out of Google when the advertising/boiler room mentality took over.
Amazon kind of does say it but they were clever about it. They don’t let rhetoric win only raw numbers. That means they will always shill or scam for profit. Has been that way for decades but only now are people paying attention.
Yes, to an extent. There were three unfavorable circumstances other than AI eating into search: FX (major), the World Cup timing, end of de minimis exemption in EU.
That’s almost always a delayed effect. Move software people around and the revenue effects aren’t instant. In a heavily R&D-oriented area it might be 2y or more.
However customers often take a while to adapt to changing conditions.
If for instance you enshittify a tool brand, first the supply chain needs to drain of old inventory and then customers need to be confronted with the new product before they react, and that may take several interactions.
Ok this case that doesn’t describe people using search but does describe a monthly or quarterly ad spend. Once the feature factory shuts down it takes a bit to notice the new trend.
Well not that surprising given that the results are now 80% ads.
The real trick is that they're pretty much the only relevant ads on the entire internet. That and they pretty much force companies into paying so that people that search specifically for that company actually see that company as the first result.
Might be useful to scale yearly revenue percentage points relative to graph start year, so f.ex. 2023 percentages sum to (total revenue 2023) / (starting total revenue).
Would give a better sense of left-to-right momentum over time when the entire pie is growing.
Both "search" and "everything else" are primarily advertising revenue[1], and advertising spend is always heavier in Q4 because of (Black Friday and) Christmas.
[1]: As the page says,
- "Search" means "ads on Google Search and on other Google properties such as Gmail, Maps and Google Play"
- "Everything else" means "YouTube ads, subscriptions and devices, Google Network and Other Bets".
The story goes that Black Friday was named that because it was the break-over point between where most companies were in the red versus when they turned the corner and were now in the black.
At Whole Foods eStore, during the time I worked there, virtually all of their profit came from Thanksgiving. Not before, not after. Just that one week. Christmas was also something of a bump, but the rest of the year operated at a loss.
GCP got really, really good in the last few years. The cross-account story is now better on GCP than on AWS. BigQuery, Spanner, Pub/Sub, GKE are all best-in-class. AWS has its advantages too: CloudFront, Lambda, S3, DynamoDB, and IPv6 support are all best-in-class. It really just depends on what your product's actual architectural needs are, and whether you have access to nosebleed budget to pay for it all (these services are all staggeringly expensive).
The growth doesn't need to be from Search. Even with the current level of search growth, Google's total revenue is up 25% year on year, operating income is up 30% year on year.
You are wrong. Search is already profitable. It doesn't need to become more profitable. The profits can simply be used to improve the profitability of other offerings like Google Cloud.
That’s not the way Wallstreet thinks. They insist on continuing growth, year over year. Accelerating growth, even.
If you don’t show growth every year, then your stock tanks because you can’t show them the profit that they would make through buying your stock today and then selling it next year.
Yes and... parent was making the aggregate conglomerate profitability growth case instead of the single-product one.
Wall Street generally cares about the former more, unless the single-product is only-product.
In this case, that's the fundamental question about Google: is it only an ad company (in which case those numbers are the only ones that matter) or more (in which case total corporate revenue is more important)?
Here's a graph with revenue in dollars by segment:
https://www.pasteboard.co/DwvXdQj2LXpk.png