Call it the juggernaut factor. Every year, dazzled by Google’s massive presence on the web, someone offers a wildly bullish prediction for its stock in the coming year. Wired pluckily predicted Google at $1,000 in 2007. (It peaked at $747.) A year later, Credit Suisse saw shares reaching $900. (It fell to $307.) Last year, Motley Fool thought Google the “best stock for 2009” – not really true: AMD, for example, is up 359 percent vs. Google’s 102 percent gain. Now, the histrionic Jim Cramer sees Google hitting a record high in 2010.
To which I say: We’ll see. Predictions are like Christmas toys — they come tumbling out in late December, only to be cast aside and forgotten a few weeks later. It’s much more useful to ask: What would it take for Google to have a blowout year? What would the company need to do to meet these bullish targets? So rather than another set of stock predictions, here’s a to-do list for Google in 2010.
1. Make me click on display ads.
And not just me. Many longtime web users can’t remember the last time we clicked on a display ad. (It’s been a few years in my case.) The more we see, the better our minds learn to instinctively tune them out. It’s no wonder display-ad revenue has been falling while search ads have been rising.
Making display ads as targeted and unobtrusive as search ads may be an uphill battle, but that was a reason for Google buying DoubleClick. It’s coming up on three years since that $3.1 billion deal was announced. Since then, there’s been Ad Exchange 2.0 and lots of talk about a “display ecosystem.” 2010 is the time to deliver on that promise. But it’s not just about wooing new advertisers online — it’s about getting online shoppers to notice display ads again.
Google’s Jonathan Rosenberg recently noted that display ads “seem to work very well” on some mobile devices because “there’s much more of a dynamic of forced engagement with display.” “Forced engagement” sounds like a shotgun marriage, but if people are less blind to mobile display ads, this area is that much more of a priority.
2. Forget hardware. Focus on Android Market.
There are some businesses Google doesn’t need to be in, and selling smartphones is one of them. Yes, it’s a wonderful way to upend an industry that needs shaking up, but subsidizing the costs necessary to make the phones price-competitive could hurt Google’s profit margins for years. Google management may not care about that, but investors will.
A more immediate need for Android phones is an app store that can rival what Apple has created. Apple’s control-freak tendencies in running its App Store is a weakness to be exploited, but Android Market has been slow to move. Android Market is still a fraction of the App Store’s size (16,000 apps on Android Market vs. 100,000-plus for the App Store), and the lack of unified standards for myriad Android phones discourages developers. As AppleInsider noted, Android Market is “more like a free rummage sale compared to an actual retail store.”
For most smartphone consumers, the features on Android phones and the iPhone are similar enough, so the battle for a competitive edge will be fought over the number and quality of apps. That makes Android Market a bigger priority for 2010.
3. Make enterprises pay.
Ask Eric Schmidt what second act Google has planned to supplement search and he’s likely to mention Google Apps. He calls the enterprise market the next “billion-dollar opportunity,” with Apps leading the way. More than 2 million businesses are using Google Apps globally; and although those with fewer than 50 employees use it for free, Apps bring in hundreds of millions of dollars a year.
Selling enterprise wares is one thing, and supporting them another — especially when you toss in concerns companies have about moving their data to the cloud. As we’ve seen, when a company’s servers go down, employees gripe privately. When Gmail suffers an outage, it makes headlines. And as Sebastian has pointed out, Google will be upping the ante with Chrome OS.
Google faces other issues it needs to address longer-term, such as improving its position in popular areas like real-time content and social networks. For 2010, the immediate question is where new revenue will come from. That means effective display ads, an improved storefront for apps, and more enterprise sales to big companies.
Hitting all those marks is a tall order. Together, they just might help Google achieve the bullish performance some are expecting. But given that each of these tasks face challenges, Google is more likely to see a year of strong, but not spectacular, growth.
Image courtesy of Gigazine.net