Google gains optimistically attributed to new products

Google's latest results paint a typically rosy picture, showing a "profit of $721 million on $2.46 billion in revenues, up 77 percent from 2Q05 but only 9 percent over 1Q06" (PaidContent), and commentators have been quick to note (BBC) that  "the "impressive" result was driven by the launch of new products and services across various markets".

Which is odd, really, because in fact the results (which were indeed impressive) appear to in fact have been a function of further improvements to Google's only significant revenue stream, search advertising. Larry Page, in the conference call reported on SeekingAlpha, makes this quite plain when he specifies the new products that have been rolled out this quarter - 200 localised versions of existing products, including the revenueless Google News. This should come as no surprise - Google is forever launching products that either have no revenues associated with them, or fall over (SearchEngineGuide) on the launch day, the commercial impact of which is utterly trivial (BusinessWeek) compared to the revenues and profits from search,

Yahoo! engineer Amr Awadallah also opines that Google's search revenue growth is mainly a function of having added more paid results to pages, and that excluding the results of this volume play Google's natural growth is no better than Yahoo!'s. George Gutowski further points out that international growth was flat, at 42% of total revenues.

In reality, therefore Google is being highly disingenuous with the claim that innovation is the key to its Q2 growth. Organic growth of the search market plus some increases in ad volumes is not innovation. That elusive diversification simply still isn't there - this is a pony with still only one exceedingly profitable trick.