Google's digital advertising business has long been the envy of the online business world, and has help turned Google into a business with more than $56 billion in annual revenue.
But the red-hot growth that once made Google a Wall Street favorite is slowing.
Google's paid clicks, the frequency at which consumers clicks on its ads, has experienced a sharp deceleration during the past few years, as can be seen in the chart below from Bank of America Merrill Lynch. While Google's paid clicks were once growing at a rate of more than 40 percent year-on-year, they are now growing by a more modest 13 percent year-on-year.
Cost per click, the price that advertisers pay Google every time a consumer clicks on an ad, is also in a funk, although that's not new.
Some investors blame the rise of smartphones for the trend. The first place that many people visit to get information these days is often a smartphone app and not Google's search engine. And when consumers visit Web pages on their smartphones, the ads that companies like Google sell are worth less money to marketers.
Google has said that the trend is the result of various factors, including the increasing role of its growing video advertising business, which monetize at different rates than its traditional ads.
Wall Street is clamoring for Google to provide more details about its various businesses, including revenue and profit for its YouTube business. It's unclear whether Google, which has a new CFO, will indulge Wall Street when it reports its second-quarter results on Thursday. But until Google gives investors new data to chew on though, investors will have no choice but to obsess over its paid clicks and CPCs.
Google just suffered three new attacks against its already troubled core business
Google has a staggering number of projects going on right now.
The company is simultaneously weaving self-driving cars along San Francisco's roads and sending internet balloons floating all around the globe.
But for all that diversity, Google is still a search and ads company — that's where it makes about 90% of its revenue.
And that core business is under attack from a million directions at once.
Look at the last two days:
On Monday, Microsoft announced that Bing would be taking over search and advertising for AOL, ousting Google for at least the next ten years.
Today, Facebook introduced an attractive new ad buying option for marketers that makes its video ads more competitive with YouTube's.
Pinterest also started rolling out its first buyable pins, a big step forward in its goal of becoming the visual search and discovery engine where users start looking when they have a glimmer of an idea of what they want to buy.
None of these things are immediately catastrophic for Google.
Losing the AOL deal is only "tens of millions" of dollars that Google won't make every few months — a drop in the bucket compared to the $17.26 billion in revenue it reeled in last quarter. And even though Facebook is becoming a bigger magnet for video ad dollars, YouTube is still enormous and much more established with advertisers. Pinterest's ad products are still relatively new, and Google is on the cusp of launching its own "Buy" button, too.
But the little cuts are adding up.
While Pinterest might just be beginning to capture visual search and subsequently up its ad offerings, Amazon's been yanking product searches away from Google for years. Desktop product search queries on Amazon increased 47% between September 2013 and September 2014, according to ComScore, threatening Google's especially lucrative kind of search advertising.
Losing the AOL deal comes less than a year after Mozilla replaced Google search with Yahoo, causing the former's largest drop in search marketshare since 2009.
Right now Google is the default search for Apple's Safari browser, but there's been talk that Apple could ditch it for Bing or Yahoo too. Regardless of whether that happens, Apple does plan to block ads in Safari on mobile with its next iOS update, at a time when Google is already losing 10% of its annual revenue to adblockers, according to PageFair, a company that monitors online ads.
Meanwhile, the amount Google can charge every time people click on its ads continues to decline, and overall growth was slower than expected last quarter, which has become a recurring theme for Google the past year.
Instead of seeing robust growth, Google's core business is going flat, right when competitors are chipping away at it.
As one former Google employee recently put it in a conversation about Google's future:
"Their core growth just is not obvious anymore."
Privacy campaigners and open source developers are up in arms over the secret installing of Google software which is capable of listening in on conversations held in front of a computer.
First spotted by open source developers, the Chromium browser – the open source basis for Google’s Chrome – began remotely installing audio-snooping code that was capable of listening to users.
It was designed to support Chrome’s new “OK, Google” hotword detection – which makes the computer respond when you talk to it – but was installed, and, some users have claimed, it is activated on computers without their permission.
“Without consent, Google’s code had downloaded a black box of code that – according to itself – had turned on the microphone and was actively listening to your room,” said Rick Falkvinge, the Pirate party founder, in a blog post. “Which means that your computer had been stealth configured to send what was being said in your room to somebody else, to a private company in another country, without your consent or knowledge, an audio transmission triggered by … an unknown and unverifiable set of conditions.”
Google to exclude ‘revenge porn’ from internet searches
The feature is installed by default as part of Google’s Chrome browser. But open source advocates are up in arms about it also being installed with the open source variant Chromium, because the listening code is considered to be “black box”, not part of the open source audit process.
“We don’t know and can’t know what this black box does,” said Falkvinge.Opt-in or opt-out
Google responded to complaints via its developer boards. It said: “While we do download the hotword module on startup, we do not activate it unless you opt in to hotwording.” Advertisement
However, reports from developers indicate otherwise.
After having identified Chromium as the culprit, developer Ofer Zelig said in a blog post: “While I was working I thought ‘I’m noticing that an LED goes on and off, on the corner of my eyesight [webcam]’. And after a few times when it just seemed weird, I sat to watch for it and saw it happening. Every few seconds or so.”
Concerns about Google’s new YouTube Kids app first reported by the Mercury News are now stirring debate in the U.S. Capitol Building, where a senator emailed CEO Larry Page late Tuesday night seeking answers.
U.S. Sen. Bill Nelson, D-Fla., the top Democrat on the Commerce Committee, wants the company to detail “how it selects content for the new app and what steps it’s taking to ensure kids aren’t exposed to unsuitable content,” according to a statement from his office Wednesday.
His letter follows two complaints recently filed with the Federal Trade Commission by consumer groups and child advocates bothered by how much the app inundates toddlers with advertising and promotional content, as well as the app’s inability to filter out some grown-up videos.
Here is what Nelson wrote:
Dear Mr. Page:
I am writing to express my concern over news reports that Google’s YouTube Kids service contains content inappropriate for children.
The reports indicate that certain content on YouTube Kids includes explicit and profane language; discussions or jokes about mature subject matters such as child abuse, drug use, and pedophilia; demonstrations of unsafe behaviors; and alcohol advertisements.
Furthermore, I am concerned that YouTube Kids may be failing to separate commercial advertising from free content programming in a manner understandable to children.
Google introduced its YouTube Kids service as a safe haven for children to access age appropriate video content.
I applaud the company’s effort to create appropriate venues for children who increasingly use online services for educational and entertainment purposes.
However, in so doing, any such service must take great care to ensure that children are not unnecessarily exposed to inappropriate content, especially since parents may rely on the very notion that such a service is “for kids” and, thus, safe for their unfettered usage. Given Google’s considerable technical expertise, the company can presumably and readily deploy effective filtering tools to screen for unsuitable videos.
Furthermore, online children services that feature commercial advertising – some of which may masquerade as content – should be clearly distinguished.
Numerous studies have shown that children have difficulty understanding and discerning the difference between advertising and non-advertising video content.
YouTube Kids should be sensitive to this well-known vulnerability.
As Ranking Member of the Senate Committee on Commerce, Science, and Transportation, which has jurisdiction over the Federal Trade Commission (FTC), I am committed to consumer protection, including protecting children from products and services that are deceptively marketed as being suitable for them. Section 5 of the FTC Act broadly prohibits “unfair or deceptive acts or practices.” Moreover, the FTC enforces the Children’s Online Privacy Protection Act (COPPA), which requires online services for children 12 years old and younger to acquire parental consent before collecting any online information. As parents seek out safe and appropriate online venues for their children, it is critical that services designed and marketed for children are, in fact, appropriate for the kids who will undoubtedly use them.
Nelson’s letter ended with four questions to Page seeking specific answers about YouTube’s internal policies and procedures and how the company selects and removes videos.
The maker of a privacy app has lodged a complaint with the European Commission, alleging Google abused its dominance of Europe's mobile market by blocking its app from the Google Play app store.
The complaint was filed by Disconnect, a US app maker founded by ex-Google employees, after its Disconnect Mobile app was pulled from the Google Play app store last year.
Google advised the company last August that the app violated its developer distribution agreement for Google Play, which prohibits apps from interfering with other apps.
Disconnect CEO Casey Oppenheim claimed that Google removed the app because it threatened the search company's tracking and advertising business and "mistook us for an adblocker" - a category of apps that Google has previously removed from its app store.
"The Commission has received the complaint and will assess it," a spokesman for the EC's competition office said in a statement to ZDNet.
The complaint says that Google abused Android's dominance of the European mobile market to unfairly favour its own privacy and security software over Disconnect's app, according to the Wall Street Journal. It also claimed that the ban limits Europeans' access to privacy and security software, while allowing Google and others to track Android users and collect information on them for advertising purposes.
The report said Disconnect has asked the regulator to make Google give its app equal treatment to Google's own security services and let the app maker distribute its product on Google Play.
Of course, Android users can still sideload Disconnect if they want, but for security reasons, Google encourages Android users to disallow installs from outside the store. Oppenheimer told the WSJ that sales "plummeted" after was banned from Google Play.
A Google spokesperson told the paper the claims were "baseless". Google did not respond to a request for comment from ZDNet.
How Europe's competition regulator will proceed with the complaint remains to be seen. It could opt not to investigate the complaint, to add it to the EC's existing probe into Android, or to launch a separate investigation.
Disconnect's complaint touches on issues the European Commission is already investigating, including whether Google has abused its dominant position in Europe's mobile market to hinder rival mobile operating systems, apps, and services. Specifically, the EC's competition watchdog is looking into whether Google obliged handset makers to exclusively pre-install its own apps or services on their devices, prevented them from marketing modified versions of Android, and illegally bundled its own software with Android devices.