Some takeaways from Google's Q1 earnings

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To response that query, let's dive into the numbers. Right here are some takeaways from Google's Q1 earnings:

one. The talent wars are taking their toll on Google

1 of the biggest raises in Google's Q1 financials was the rise in stock-based compensation expenditures. In Q1 2010, Google doled out $291 million in stock options and bonuses. In Q1 2011, that amount rose 48% to $432 million.

We know that Google's been working overtime to retain its present-day personnel, as well as develop its existing workforce. Final yr, Google gave most people a 10% boost and a $1,000 bonus. But that hasn't been adequate to cease Facebook, Twitter and people from raiding its expertise. Google's even reportedly making considerable counteroffers of $fifty+ million to retain its high workers from jumping ship.

The lack of engineers to meet the great need in Silicon Valley has produced a war for talent involving the world's leading tech providers and the hundreds of startups in the Bay Location. The outcome is that Google has to pay out alot more for talent, and it really is going to get worse.

Prediction: the $432 million it spent in Q1 will be almost nothing compared to what it spends in Q4 this yr.

2. R&D is way up, but why?

Google spent a ton of income on R&D this quarter. In Q1 2010, Google spent $818 million on R&D ($627 million if you take out stock-based mostly compensation). In Q1 2011, that range jumped by a whopping $408 million to $one.23 billion ($989 million sans stock-based compensation).

So what induced the remarkable rise in investigate and progress? Whereas Google declined to break down its R&D line things, we suppose it seems anything like this:

one) Social
two) Social
three) Social

It is really no secret Google has a poor track record on social media. Although YouTube has turned into a strong home, Google Buzz was 1 of 2010′s largest tech flops. It is been creating merchandise like +one andadvanced social search, but none of these assignments have been plenty of to combat off the Facebook threat.

Social media results is so necessary to the small business that bonuses are now tied to Google's social media achievement.

We're positive there are other factors contributing to this quarter's inflated R&D budget (Android, Chrome), but we bet social is a leading contributing factor.

three. Google's flexing its promoting muscle

In Q1 2006, Google invested $191 million on sales and marketing and advertising. In Q1 2010, that amount was $607 million. In Q1 2011, that variety skyrocketed to $1.03 billion –that's a stunning improve of 69% in just a person 12 months.

What is Google spending all that dollars on? During today's earning get in touch with, CFO Patrick Pichette defended the $1+ billion rise in operational expenses. One point he pointed out: Google's increased shelling out has prepared Android a dominant mobile platform. 350,000 Android devices are now being activated all day. There's a explanation why people are predicting Android could own half of the smartphone industry by 2015.

We've witnessed an boost in Google's online marketing efforts around the last few years, and that's reflected in the shelling out. Android has been the great beneficiary, but Chrome has gotten some the spotlight as nicely. SVP Jeff Huber reported on today's get in touch with that 40% of Chrome's 120 million customers arrived from its promotion efforts.

For decades, Google spurned customary advertising, but in competitive markets like search and cellular, it simply just desired to pony up the money to get the phrase out about its solutions. The investment appears to be to be paying out off so far.

four. Google's in really beneficial shape

Google's stock might be taking a beating right now (the stock is down ~5.5% in after hours investing), but over-all Google's doing just good. Revenue is up 27% and earnings are up 15%, despite the major boost in investing. These are strong metrics that stage in the appropriate path.

The big increase in operational shelling out is a thing to be anxious about, but most of these investments are in advertising, R&D and personnel — the forms of investments that ordinarily pay out off via greater products. It would be a completely different tale if the boosts ended up coming from operational inefficiencies or a bloated workers, but neither appear to be the case.

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