* Google’s TV, commerce projections seen as “ambitious”
* Court documents provide rare insight into search giant
* Emerging threat from Facebook, Bing
By Dan Levine and Alexei Oreskovic
April 25 (Reuters) – Google Inc projected in 2010
it would get more than 35 percent of its 2013 revenue from
outside its flagship search operation, anticipating three
non-search businesses, including commerce, would generate more
than $5 billion each, according to internal company documents
filed in court.
The documents provide a rare insight into Google’s mindset
and reflect the Internet company’s ambitious plans to expand
into new markets, underscoring the challenges it has faced in
its efforts to break its reliance on its search business.
Online commerce and an initiative to bring Google services
to television were important pillars of Google’s growth plans at
the time, the documents show. But analysts say neither appear to
be on track to deliver the kind of pay-off Google expected.
“Google TV and commerce ambitions look aggressive compared
to what we believe they are today,” said Susquehanna Financial
Group analyst Herman Leung, who reviewed the Google documents.
The projections for Google’s various businesses were part of
a presentation to Google’s board of directors compiled by
company staffers in October 2010. They were revealed during the
high-stakes trial of Oracle Corp against Google over
smartphone technology.
Google attempted to convince U.S. District Judge William
Alsup to keep the internal documents secret, but Alsup denied
the request in court last week.
Google spokesman Jim Prosser said on Wednesday the documents
do not represent current thinking about its business operations.
“Our industry continues to evolve incredibly fast and so do
our aspirations for our various products and services,” he said.
Still, the presentation provides a window into Google’s
strategic thinking at a time when the Web’s dominant search
engine was facing competitive pressure on numerous fronts.
Google highlighted the emerging threat from an alliance
between social networking service Facebook and
Microsoft’s Bing search engine, noting that
“Facebook-Bing users may bypass Google.” Google also said
revenue from its business selling software to companies was
“disappointing.”
Oracle has accused Google’s Android mobile operating system
o f violating its intellectual property rights. An Oracle
spokeswoman d e clined to comment on the internal Google
pr o jections.
Oracle attorney David Boies briefly referred to the
documents on Wednesday while questioning Android mobile software
chief Andy Rubin, but Boies did not delve into the projections.
However, a full copy of the internal documents has been formally
admitted into evidence in the case.
FAILED TO CATCH ON
Google’s YouTube business was estimated to generate $5
billion by 2013, thanks to a $3 billion contribution from Google
TV, a then-new product that allows consumers to access Google
services such as search and YouTube videos on their television
screens.
But analysts say Google TV has failed to catch on with
consumers. Logitech, one of Google’s initial partners that
developed a set-top box offering the service, said in November
it would cease making Google TV devices. In January, Google
announced plans for new devices from LG and Samsung.
Google projected that commerce, a category that includes
sales of digital content and mobile payments as well as product
ads, would deliver $5 billion in revenue in 2013.
Google had forecast its total revenue in 2013 would be $55
billion, according to the documents, with $34 billion in revenue
from its search business.
Eric Schmidt was Google’s CEO at the time the documents were
created. In April 2011, Schmidt handed the reins to Google
co-founder Larry Page, who has moved swiftly to pull the plug on
projects that are not paying off while focusing efforts on
opportunities including mobile, social networking and display
advertising.
Google’s efforts to tap new revenue have been closely
watched by investors, eager for new growth as the search
business matures yet wary of initiatives that threaten margins.
Shares of Google, which closed Tuesday’s regular trading session
at $609.72, are down roughly 6.6 percent in 2012.
Google was also optimistic about its plans to enter the
music business. In a separate set of documents in the case, the
company forecast music sales would drive Android revenue to $3.7
billion in 2013.
Estimating the ratio of Google’s search and other businesses
is complicated because of the limited information Google
discloses about its various businesses. A n alysts’ estimates for
Google’s non-search business currently range from 10 percent of
the company’s revenue to as much as 25 percent.
“Their core business has done better than they were
forecasting. Search is growing faster than 10 percent a year,”
said Colin Sebastian, an analyst at RW Baird.
Google still has work to do in areas like commerce, he said.
The 2010 documents show Google’s search business generated
$19.2 billion in 2009, while the display business brought in
$3.2 billion that year. YouTube made $300 million, while
e-commerce brought in no revenue.
The case in U.S. District Court, Northern District of
California, is Oracle America, Inc v. Google Inc, 10-3561.
