Google Inc, which has almost become synonymous with the internet, feels it is yet to capitalise the market fully.
Nikesh Arora, Senior Vice-President and Chief Business Officer at the Mountain View, California, US-based search giant, shares his thoughts with Piyali Mandal on why he believes the 13 year-old company has barely scratched the online world’s business potential. Edited excerpts:
Advertising is susceptible to economic shocks, like the one rattling the euro zone currently. And Google gets almost its entire revenue from advertising.
Airlines get all their revenues from flying planes. Airlines started catering business but they still get their revenues from flying. We have a phenomenal advertising business and you are asking me why I only get money from advertising!
So, you are saying that Google will continue to predominantly be an advertising-led business?
It (advertising) is an $800-billion industry, I only did $9.5 billion last quarter. So I am still on a run rate of less than five per cent of the industry. That doesn’t seem a lot of run rate there.
We are in the search business, in the business of directing traffic on the Internet now. A lot of advertisers are now interested in it.
We are trying to plug in technology and trying to make it more and more efficient so that advertisers can bank their buck.
We had built an ecosystem. Within advertising space we have diversified on multiple channels, platforms.
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Google’s revenue largely comes from search-led advertising. How do you see that changing?
There are two aspects. There is performance-based advertising or call-for-action advertising. An ad that says get something for five rupees cheaper now is a call for action. That (the outcome of the ad), you can easily measure.
And then there is another type, the brand (building) ad. There is no call to action in such type of ads. In that context, digital advertising is primarily performance-driven. So far, it is all -click-search-buy.
There is very little brand component in it. Having said that, there a huge trend of more and more people coming online not only in the US. Look at India from 30 million to 100 million (online population).
Globally, few years ago we were not a player in display (ads). We had made a concerted effort in terms of hiring people, putting systems into place and building a large network. We had announced a year ago that we had one billion dollar revenues in display.
In display advertising, the average spends by an advertiser has gone up by six times. We have already said display will have a run rate of $ 2.5 billion, a year ago.
Mobile advertising has a run rate of $2.5 billion this year. The growth rate is humongous.
How is the enterprise business shaping up?
Globally, the enterprise business is not as big as we like it to be. We are working hard on it.
A lot of global political/social activism rides on products and technology that companies like Google offer. And sometimes it pits you directly either against governments or activists. How do you see your role?
Internet is now a platform. It is the largest communication network. It is an enabling platform. Using the enabling platform, multiple things are going to happen. People are going use it for social and political activism. When you build a road people will drive for a multiple of reasons.
According to me, having a zero frictional communication system is a phenomenal thing for a connected society. All this uprising, such as Occupy Wall Street or Arab Spring, is facilitated by the platform. We are platform, and majority of the country have started recognising that. It is matter of education and collaboration.
Google has announced that it will acquire Motorola Mobility.How does the acquisition of Motorola fits in your overall strategy?
Motorola was first adopter of Android. The acquisition will give us access to hardware business of Motorola and their patent portfolios. The deal is not closed yet.