Analysis To understand the situation, we first have to know where Google’s profits come from. So here it is… Google makes most of it’s money from advertising. Their first type of advertising is the “adwords”, they let you put out an ad with zero obligation, meaning if no one clicks on your ad, you pay nothing, if someone clicks on your ad they use the “cost per click”, meaning you get paid for every click. They also have the “adsense” which is something like “adwords” but you get paid to have google ads placed on your website, it also uses the “cost per click” to pay you. So having understood that, we can now try to understand what’s wrong. Google spent nearly 13 billion dollars for Motorola Mobility. That’s a lot of money for something so unprofitable, especially when the world is in a financial crisis. So now google’s stocks have dropped with about 8%. Outside of Motorola, Google’s performance was more in line with expectations. Revenue from its sites grew 19 percent to 7.7 billion dollars and those from its partner sites grew 21 % to 3.1 billion dollars. But even in its core business, Google faced some rising costs, especially in stock-based compensation. Another metric showed ad rates declining quickly. Average cost-per-click fell 15 % from last year, even though click-throughs on Google ads grew 33 %. Only a few quarters ago, cost-per-click was growing by more than 5 %. In a call discussing earnings, Google attributed the decline to more ads in emerging markets. So having said that, we can now try to define possible future scenarios for google.
1. Economy growth, less competitors. If economy is in a state of growth, which means that people’s incomes will probably increase, having more money people will be willing to pay more for goods. For example paid google store apps. That will