Google's next act: Diversify and conquer

Center stage at this year's Google I/O was a company honing its vision for a future beyond search

Guessing Google's future direction is a bit like trying to predict the path of a flock of birds: Tracing the trajectory of any one bird provides scant guidance, but there's little question the whole flock is headed north.

Search, Google+, Android, Google Glass, self-driving cars -- the company famous for beta launches (and killing projects) appears to be evolving in almost every direction at once. But examined together, Google's innovations, acquisitions, and strategic maneuvers reveal a few clear directions driving the company forward.

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To be sure, last week's Google I/O showcased a company intent on spinning as many plates as possible, all at once, but the past two years with Larry Page in the CEO office have slowly revealed a firm focused on corralling its advertising, mobile technology, cloud services, and hardware plays into a second act beyond search.

The future of Google's ad business: More, but different

Of course, Google's No. 1 business isn't really search; it's advertising. But how long can the company depend almost entirely on revenue from ads alone? The answer depends on how successful the company can be in diversifying its approaches to extracting revenue from service-based offerings.

"Google isn't the 800-pound gorilla in the online advertising space for no reason," says Victor Pan, senior data analyst at WordStream, a company that provides pay-per-click analysis software and services.

Pan sees a solid road map ahead for Google, thanks to its existing bets on mobile technology, where search is showing the strongest growth. Google's acquisition of mobile advertising platform AdMob and its AdWords Enhanced Campaigns, which allows advertisers to target both desktop and mobile devices automatically, create a strong foundation for Google's revenue growth in the years to come, Pan says.

"As long as Google innovates its ads to a consumer's search habits and educates its advertisers to do the same, Google's advertising growth will remain sustainable," Pan adds.

Shar VanBoskirk, vice president and principal analyst of interactive marketing at Forrester, also doesn't believe Google needs to establish a major source of revenue beyond advertising. Instead, VanBoskirk says, Google is diversifying its product and services portfolio "not because it has to, but because it can and it stands to make more money by entering new markets."

Adam Grunwerg, managing director of digital media agency, concurs: "Many of Google's products, including YouTube, Google+, and Android are the legs to support its growing ad business and generate more users in various markets." He also notes that Google's latest first-quarter earnings in 2013 showed a drop in the proportion of revenues coming directly from advertising, from 96 percent to 92 percent previously, thanks to its push into new markets: "reality eyewear [Google Glass], mobile payments, and wireless Internet infrastructure."

Last week's Google I/O solidified another major direction that had been previously hinted at: Google Now predictive search. Many common searches already produce answers from related queries. Google Now is being tooled to provide preemptive information based on one's location or movement habits. These, in turn, give Google and its partners new monetization opportunities -- assuming consumers don't find a way to preemptively opt out of them as well.

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