What Is Google Spending All That Money On? (GOOG)

Investors are selling off Google shares after hours in the wake of its earnings report this afternoon. The stock is down more than 5% as of 6:30 ET. The company showed strong revenue growth -- 27%, from a high base -- and huge positive cash flow. But expenses also expanded at a rate that one analyst called "previously unthinkable." (Jordan Rohan of Stifel.) Not including cost of revenue (mainly traffic acquisition), operating expenses were up a startling 54% from last year's quarter, coming in at $2.84 billion. Capital expenditures also nearly tripled from last year, to $890 million. On the earnings call, Google explained what it's spending all that money on:

New hires. Google hired 1,900 employees during the quarter, bringing the total to 26,316. A lot of these employees were in "growth" areas (read: not search, and not as profitable as search) like YouTube, Chrome, and Enterprise. The company said now is the time to build, since it's seeing great revenue growth across all its businesses. It plans to hire more than 6,000 people this year.

Retention. Google gave all employees a 10% bonus toward the end of last year, and this is the first complete quarter where it showed up on earnings. The bonus had a disproportionate effect this quarter because it also flows through to other compensation like vacation and 401(k) pension plans, and those added expenses were all counted this quarter.

Advertising. Google also did more advertising last quarter, particularly for newer products like Chrome.

Facilities. The capex spend was mainly to buy new buildings in Dublin, Ireland and Paris, France, as well as for continued data center buildouts.

As Rohan points out, short-term investors may look at these expenses as evidence that Larry Page will not manage Google as tightly as Eric Schmidt did. But long-term investors might consider that it shows an incredible confidence in its revenue growth prospects. Rohan maintains a "buy" rating on the stock and a target of $775. For the latest tech news, visit SAI: Silicon Alley Insider. Follow us on Twitter and Facebook.Join the conversation about this story »See Also:Google Revenue Strong In Q1, But Expenses Concern InvestorsApple Steals Microsoft Employee To Run Its Mysterious New Data CenterLarry Page Takes The Reins On Google Earnings Call Today

Google Is Looking For More Money From Small Businesses (GOOG)

Google has launched a program to make it easier for small business owners to buy search ads. It's all part of the company's ongoing effort to earn more money from local businesses, which CEO Larry Page cited as one of his priorities on the company's last earnings call. AdWords Express, which was tested last fall under the name Boost, offers businesses a series of simple forms to let them set up an AdWords campaign in minutes. Businesses can set a maximum budget and guide users either to their Google Places page. If they don't have a Places page Google will set one up automatically when they buy the ad. Page named local (along with Google+) as one of the company's top investment areas this year. The company recently launched a daily deals service called Offers and is teaming up with Intuit for a big campaign to give small businesses free Web sites and AdWords credits. Please follow SAI on Twitter and Facebook.Join the conversation about this story »See Also:Here's Why The Bing-Yahoo Deal Isn't Working So FarHere's Why Google+ Is Banning (Some) Fake NamesGoogle Is Blasting Business Profiles From Google+

The 21 Most Important Googlers You've Never Heard Of (GOOG)

Everyone knows about Larry, Sergey, and Eric. However, few people know about the rest of the Google team that really made it possible. We recently read Steve Levy's thorough book on Google, In The Plex, and pulled out some of the names that popped up. These people might not be as famous (or rich) as Larry and Sergey, but their contributions were key to making Google the beast it is today.Andy Bechtolsheim, Dave Cheriton, Ram Shriram, and Jeff Bezos were the first backers

Without investment from these angel investors, Google may not have been able to get going. Interestingly, Jeff Bezos was one of the first people. He might still be holding onto some Google stock, says Levy. Amit Singhal totally rewrote the code Google used to determine what mattered in search in 2001

The original code Google used to determine what signals mattered was written by Larry Page, but it was in desperate need of a rewrite. So early hire Amit Singhal did it. Five years later Singhal was named a Google fellow and probably awarded millions for his work. Matt Cutts killed porn from Google's results

Google needed to weed out unsafe results from its search, like Porn. Matt Cutts was the man tasked with looking at websites to determine what was and what was not porn. From there he assembled a list of signals for the search engine to filter out the filth. See the rest of the story at Business Insider For the latest tech news, visit SAI: Silicon Alley Insider. Follow us on Twitter and Facebook.See Also:13 Unusual Ways Sergey Brin And Larry Page Made Google The Company To BeatMicrosoft Slams "Hidden Costs" Of Google AppsFacebook And Google Fighting Over Skype

An Open Letter Seeking Insight Into Google CEO Larry Page

After Google's first earnings call under new CEO Larry Page, we wrote a post arguing that Larry had done exactly the right thing by basically ignoring Wall Street. (Larry spent a couple of minutes on the call and then went off to do something more important.) In general, we think that CEOs and companies spend way too much time obsessing about their stock prices and Wall Street, so it's always refreshing to see a CEO who doesn't play that game. We observed that Larry might be following the example of a couple of other super-successful CEOs who don't play that game--Jeff Bezos of Amazon and Warren Buffett of Berkshire Hathaway. Bezos and Buffett care deeply about the long-term quality and value of their companies, but they recognize that the short-term "how's the quarter" obsessions of Wall Street often conflict with increasing long-term value. As a result, they often make decisions that are expensive and margin- or growth-destroying for this year or next, but increase the competitive barriers or long-term value of the companies. Google is in a tough spot right now: Its core business, search, is maturing, and it has yet to develop a second major revenue stream. Google is also in a war with other huge competitors, including Apple, Microsoft, and Facebook. And it is likely that any big new businesses Google develops will have lower product margins than its spectacular search business, which Wall Street won't like. So Google is faced with a choice: Maximize the profitability and growth of the core search business by cutting out everything else, or invest huge sums in other, lower-margin businesses that could potentially drive its next major growth wave. New CEO Larry Page, it seems, is pursuing the latter strategy. But when we wrote our post complimenting Larry for keeping Wall Street's short-term concerns in perspective, we quickly heard from a couple of folks who saw it differently. It wasn't that Larry was focusing on "long-term value," the writers said. It was that Larry just doesn't give a crap about shareholders. In this way, one of the writers said, Larry is very different from Bezos and Buffett--and not in a way that will necessarily increase Google's long-term value or make long-term shareholders (or short-term shareholders) happy. We've included two of the notes we received below. But before we get to them, we'd love hear from more of you who have insight into Larry and his likely plans for Google. One of the problems, after all, is that, unlike Bezos and Buffett, Larry has never articulated what his long-term mission and vision for Google is. In the past, Larry has pursued pet projects like wind power and self-driving cars that have nothing to do with Google's core business. And if Larry's plan is to double-down on these pet projects (and others), Google could lose discipline and focus and become a complete train wreck. So what do you think Larry's planning to do with Google? Drop me a note at hblodget@businessinsider.com. I'll keep your identity confidential. (And, obviously, I invite Larry to drop me a note as well!) Here are two responses we've already received. More to follow. From an ex-Googler: Thoughts on Google: Larry will miss earnings the next several quarters, and possibly for many years.  He wants to get aggressive with the company.  He and Sergey honestly believe that every employee they hire will result in greater revenue.  Really.  Also, he does not believe in Product people - he only believes in Engineers.  Look for Google's products to become even more nerd-centric.  He is hiring aggressively and spending wildly.   My 1-year target on Google stock is mid-400s.   Larry has so much money that he is disconnected from the rest of the world, and is not the least bit afraid of spending whatever he wants.  He and sergey only have a couple more years before they have lost control of the company, and they want to make their mark. That Google chart on your site that has analysts worried?  That is exactly what Larry wants.  Since every employee results in $1M more revenue, spending $522K per employee is still immensely profitable.  Of course, they have no reason for the $1M/employee other than blind faith.  In the past Eric kept the hiring in line with revenues. From an investor: I think you are wrong on the Larry Page post.  Page doesn't give a shit about Wall Street because he doesn't give a shit about shareholders.  Bezos is different.  He is a student of Buffett and Graham and Dodd.  He hails from the Street himself, and he and Bill Miller's team have been talking about shareholder value for years.  Years.  Page couldn't spell fiduciary duty and thinks of investors as a necessary evil.  Huge difference. See Also: Here's The Chart That's Scaring The Crap Out Of Google Investors For the latest tech news, visit SAI: Silicon Alley Insider. Follow us on Twitter and Facebook.Join the conversation about this story »See Also:Google's Stock TanksGoogle Gets A Big Price Cut GOOGLE'S LARRY PAGE DOES EXACTLY THE RIGHT THING: Says "Whatever" To Wall Street

Larry Page Sounded Like A True CEO Today (GOOG)

Make no mistake: Larry Page is in charge. Today, he showed it. We were beginning to worry -- since he took over, there have been a bunch of press reports and books describing him as a recluse, a little bit shy, a little bit arrogant. Insiders say he's not communicating as much now as he did in his first weeks. On his first earnings call as CEO, he spoke for a couple minutes and didn't stick around for the Q&A session -- almost like he was embarrassed to be there. Or worse, bored. Today couldn't have been more different. He kicked off with a solid speech about why Google is in such a great position -- and then posted the whole thing, verbatim, to his Google+ account. (Talk about dogfooding!) Then he stuck around to answer questions, and even occasionally interjected where he wasn't expected or invited. In his speech, and again during the Q&A, he said he thinks of Google in three parts:

Search and advertising, which drive revenue today and are therefore still a huge area of focus.

Popular consumer products like Android, YouTube, and the Chrome browser. That's an area of investment now, but he's confident that they will figure out how to monetize them -- just like they figured out how to monetize search back when everybody said it was a dead-end business.

Long-term investments like Google+, Offers, and other local products, which are just rolling out now.

He also compared Google to a toothbrush: he wants people to use the company's products twice a day, every day. Throughout it all, he was relaxed and even a little bit funny. He seemed to be enjoying himself, like when he answered a question about whether Google manages for the company's stock price: We have a lot of things to do at Google, and we don't control our stock price. You guys control that. (Of course, it's easy to relax when you just posted a monster quarter.) Former Google employees who worked with Page regard him as a genius. But his reluctance to engage the outside world made it hard to understand what they were talking about. Hopefully, today marks the beginning of a change. See also: Google's Q2 Earnings Blow Past Expectations. Please follow SAI on Twitter and Facebook.Join the conversation about this story »See Also:Will Larry Page's Second Earnings Report Be Better Than His First?THE GOOGLE INVESTOR: Wall Street Weighs In On Google Earnings Before The BellCHART OF THE DAY: This Is What Microsoft Is Getting For Its Big Bing Investment

WALKTHROUGH: How Google Plans To Change Search Results With Google+ (GOOG)

This morning, Google made some changes to its search engine that will make results more personal, based on what you and your friends have shared on Google+. This isn't the first time that Google has brought information from Google+ into search results, but it's the first hint of how Google will revolutionize what search means by adding more "social" signals -- your contacts and the things you share with each other. Here's a walkthrough of everything Google is doing to bring Google+ into search results.Here's a generic search on the term "Chikoo," which is a fruit and a file organizing app for the Mac.

But Google search chief Amit Singhal had a dog named Chikoo. His search shows posts related to Chikoo at the top (red arrow). The Wikipedia entry is still second, but the images (yellow arrow) now have a bunch of pictures of his former dog. (The green arrow points to where you can turn this feature off.)

Here's a search for the name Ben Smith. Results include a political blogger, hockey player, and Texas singer-songwriter.

See the rest of the story at Business Insider Please follow SAI on Twitter and Facebook.See Also:Google+ Is Way Bigger Than We Thought: It's Totally Going To Change How The Web WorksGoogle Just Made A Huge Change To Its Search ResultsTwitter Slams Google's New Social Search Features: 'We're Concerned'

Hey Google Investors, Get Ready For An "Even Wilder" Era, With More "Moon Shots" (GOOG)

Google under Larry Page is going to be filled with "more moon shots," says Steven Levy, author of a forthcoming book on Google called, "In The Plex." Levy wrote a profile of Page for Wired magazine as a run to Page taking over as CEO at the start of April. The bottom line: "Google has had a wild ride over its first 12 years. It’s about to get even wilder." Here are some of the key takeaways and anecdotes on the man who will be leading Google:

"If history is any guide, Page’s idealistic impulses could result in a vaster, more sprawling company," says Levy. Later in his story he adds, "With Page in charge, Google will undoubtedly take on more moon shots."

For an illustration on Page's tendency to think big, Levy provides this anecdote: In a 2003 meeting Page was asked how big he wanted Google to grow. Page asked, "How many engineers does Microsoft have?" Someone told him it had around 25,000. He said, Google "should have a million." And he was being serious.

Larry Page says he was inspired by Nikola Tesla: "I didn’t want to just invent things, I also wanted to make the world better.”

Google software engineer Eric Veach says, "Larry always has far-fetched ideas that may be very difficult to do ... And he wants them done now."

Larry Page signs off on every Google employee hire. He's vetted over 30,000 employees. He gets a packet of data on potential hires once a week that he sifts through.

In the early 2000s, Google was figuring out how to take payments in local currencies around the world. Page suggested the company accept goats for payment in Uzbekistan. (Apparently that's the local payment system.)

As for Google's self driving cars, Page likes them because A. They collect data on the world, which is something Google loves and B. it's an impossible task, another thing Page likes to tackle.

Read the entire story at Wired, it's filled with great nuggets »Join the conversation about this story »See Also:Eric Schmidt Out As Google CEO, Larry Page Takes OverGooglers Say Larry Page Is A "Rude" "Egomaniacal" "Jerk," Who Is An "Intellectually Honest Visionary""He Always Wants It Bigger" And Other Things You Should Know About Larry Page

The Truth About Google CEO Larry Page: He's Just A Big Nerd Who Loves Technology And Wants To Change The World (GOOG)

Larry Page talked to Bloomberg BusinessWeek on his one-year anniversary of taking over Google's CEO, and darned if we don't like the guy a lot better after reading it. He comes across as a likable nerd who is truly psyched about technology and changing the world. Look at what he said about Motorola: ...We’re really excited for the opportunity to arrive. What we see, having these amazing devices in your pocket.  Every time I get a new one, it’s like a kid on Christmas. I mean, it’s just totally—my life has changed. It’s kind of like the experience of first using the Internet or using a computer as you get these new phones. About Google+: One of the things I’m just really excited that we launched is: For the first time you can actually search for a person. You never were able to do that. About Google losing its edge: No. No. I don’t worry about that at all. And you know, we’re a much bigger company than we were 10 years ago, so we have more resources to do things. Pretty much everything we’ve done that’s been successful has been sort of a many, many year kind of effort .... These things don’t just kind of snap into being, as much as I would like them to. It takes time. About Google losing its soul: Producing the best thing we possibly can for users is our paramount thing. I think we have demonstrated that over a very long period of time with a whole variety of different issues we’ve faced around the world. Not that he's a softball. He also takes shots at Facebook, calling their data export policy "completely unreasonable," and patent litigation: "companies usually get into that when they’re toward the end of their life cycle or they don’t have confidence in their abilities to compete naturally." But still. When you're done reading, you almost forget that a number of people have recently accused Google of ruining their businesses, using search to compete unfairly in other areas, and just generally being evil. To be clear: we don't think Page is faking it. Not at all. A lot of early Googlers say he really is like this -- in love with technology and totally driven to change the world. Page seldom talks to the press or makes public appearances. On earnings calls, he seldom unwinds from what seem to be carefully prepared remarks. (Like most execs do on earnings calls.) He should really do this more often. See also: Larry Page Has Now Been In Charge Of Google For One Year. So How's He Doing? Please follow SAI on Twitter and Facebook.Join the conversation about this story »See Also:Larry Page Has Now Been In Charge Of Google For A Year. So How's He Doing?Larry Page Has Been Running Google For A Year, And The Stock Has Gone NowhereLARRY PAGE: Steve Jobs' Fury Over Android Was All 'For Show'

Larry Page Was Obsessed With The Name 'Google' Even In High School (GOOG)

Google got its name as a respelling of Googol, a massive number represented by a one followed by a hundred zeroes. It turns out Larry Page, Google's current CEO, was obsessed with that number even in high school, according to a post on Quora by former classmate Rakesh Agrawal. Page and co-founder Sergey Brin originally named the search engine BackRub, but renamed it to Google in 1997.  On Google's "about" page, it says Page picked Google because "the use of the term reflects their mission to organize a seemingly infinite amount of information on the web." It was respelled "Google" because it would be easier to spell, Agrawal said. Agrawal, a former product manager at Microsoft and now an analyst, says he went to high school with Page. Please follow SAI on Twitter and Facebook.Join the conversation about this story »See Also:Google Employees Don't Know Why One Of Its Hottest Acquisitions Is Being Shut DownGoogle's Stock Split Is EvilThe FCC Just Fined Google $25,000

Larry Page To Googlers: If You Don't Like 'Search Plus Your World,' Hit The Road (GOOG)

UPDATE: A Google spokesperson reached out to us to say Google categorically denies that Larry ever said "If you don't get that, then you should probably work somewhere else." Bad news, Googlers: if you don't like Google's new "Search Plus Your World" direction, you should leave the building. Google's new social strategy has ruffled a few feathers. One ex-Googler told us it was a "sad day" and a "turning point" when Page carried out his plans to launch "Search Plus Your World," which would have been "unthinkable" a few years ago. So Page told all his employees on Friday that if they didn't like it, they should leave, PandoDaily reports. “This is the path we’re headed down – a single unified, ‘beautiful’ product across everything," Page said, according to PandoDaily. "If you don’t get that, then you should probably work somewhere else.

Please follow SAI on Twitter and Facebook.Join the conversation about this story »See Also:Google Pays Contractors $14.50 An Hour To Rate Its Search ResultsHere's How Google Search Is Destroying Our MemoryTHE APPLE INVESTOR: Apple Expected To Blow The Doors Off Tomorrow's Earnings Announcement