Google Google to find out that it’s not all hunky dory
It may have evaded the data-sharing row that engulfed Facebook and Twitter, but it’s sure got its own problems
It has been a common source of wonder in recent weeks that the global reckoning over how Internet companies collected and use our personal data has not, so far, managed to entrap the company that is the biggest hoarder of them all.
Executives from Facebook have been hauled in front of politicians in various places from Washington to Westminster and Singapore following the Cambridge Analytica revelations. Twitter was dragged into the fray when it emerged that it had sold information to the researcher at the centre of the scandal.
But what of Google, which seems to have emerged relatively unscathed?There has been no suggestion any personal data held by the company have been exposed to outsiders, in the way Facebook’s have. But the story has by now mutated into something bigger: an exposé of our collective naivete over the data-gathering tactics of the world’s biggest companies.And while much of the data exposed by Facebook was rather innocuous – such as the films and musicians we like and our political beliefs – the information held by Google is much more sensitive. Our entire lives could be told through our search histories, while the company’s analytics and advertising networks mean it can track practically our entire browsing history. Google Maps knows where we travel and when. Until recently, the company’s Gmail service, used by more than a billion people, scanned the contents of every e-mail. So why has it managed to rise above the bad smell that lingers around much of the rest of the tech industry?There are a couple of obvious reasons: There is no evidence that Google data has been compromised, for one thing. Google’s bosses have been aware for some time that it behooved the company to keep its data to itself, rather than Facebook’s idealistic prospect of sharing it with other companies for their benefit.
Importantly when it comes to public perception, Google’s products are almost all seen as a good thing. While there remains a big question mark over whether social networks are actually good for us, Google search, maps and e-mail services are categorically useful.
And finally, Google has also been around for two decades, making it almost an elder statesman. The company has moved more slowly, and perhaps responsibly, than some of its rivals.
So the company has so far avoided one of the Internet industry’s biggest scandals. But it would be a mistake to think that all is rosy at the company.
Some threats have loomed over Google for some time. It is the one real tech monopoly (Amazon, for all its might, still accounts for a minority of Internet shopping) and as a result faces increasing antitrust scrutiny. New European data laws coming online will affect every facet of its business.But investors are realising another cloud that hangs over Google – that while its Internet advertising business is in rude health, its bold ambitions to become much more than that seem to be losing steam.
It has been almost three years since Google overhauled its corporate structure, creating a new company called Alphabet. Google – made up of operations like the search engine, Android mobile software and advertising network – was meant to be just one of many successful businesses under the Alphabet umbrella.
Separated from it were the divisions that could become the next Google – including the Internet of things business Nest, the broadband provider Fiber and the self-driving car unit Waymo.These so-called “other bets” were meant to be the growth engines of the future. Meanwhile, Google itself was pushing into exciting new territory such as selling its own smartphones and offering cloud computing services to businesses, both potentially lucrative new avenues.
But Alphabet’s first-quarter financials revealed the company has made little progress weaning itself off its core business.
Google Internet advertising still accounts for 86% of all Alphabet’s total revenues, barely changed from a year ago. Rather than coming from Alphabet’s “other bets”, most of the rest of the revenue is coming from other parts of Google, such as cloud computing. And the company is quickly realising this is an expensive game.While data-driven Internet advertising has proved to be one of the most profitable businesses there is, the company’s new growth areas require enormous investments in warehouses, supply chains and data centres. Alphabet’s capital expenditures have tripled in the last year, pushing its profit margins from 27% a year ago to 22%.
This is Google’s dilemma. For two decades it has enjoyed growing sales and profits on a relentless data-driven business model. That is now under threat from new laws and growing public wariness about with whom we share our personal data.
The company’s years-long efforts to branch out from this seems a prescient strategy given the recent Facebook revelations, but few markets are profitable enough to match its old one, as is now becoming apparent.
For evidence of this one need only look at the company’s shares. Alphabet’s share price is down 2% this year amid a wider tech boom, the same amount by which Facebook’s has fallen. Its market value has been overtaken by both Microsoft and Amazon. Google may have evaded the Cambridge Analytica row, but it has its own pains to deal with.
© The Daily Telegraph