Google Resorts To Cost Cutting in Effort to Grow Profits

Google Resorts To Cost Cutting in Effort to Grow Profits

Google is making an effort to get its profit growth back on the upswing, marking a turn from high growth business to mature cash cow. The mega company is trying to grow its profits by implementing a series of cost-saving measures including the capping of hiring at its struggling Google+ social media division and placing greater scrutiny on requests for supplies, events and travel. These measures come in the wake of a dwindling operating-profit margin, which declined to 32% in 2014 from 38% in 2011.

Financial analysts and investors have understandably become disappointed in the company due to the decreasing growth rates. While Google’s 2015 first-quarter results revenue rose to $17.3 billion, compared with the first three quarters of the prior year, its 2014 fourth-quarter sales fell short of expectations, growing only 15.3% to $18.1 billion, which was below the expected $18.5 billion.

There are several factors which have led to dwindling stock prices such as lowered cost-per-click prices and a slowdown in per-share prices. However, investors and analysts still believe that Google can bounce back. In addition to the cost-saving measures listed above, Google needs to strengthen its mobile ad solutions just like Facebook has done. The social media networking giant has earned 70% of its revenue through mobile ads and Google should concentrate on building stronger mobile networks.

In addition to the struggling Google+ division, other divisions have yet to make a profit. Google’s YouTube, which is very popular among its users, is grappling to get in the black. Although YouTube’s revenue increased by $1 billion in 2014, after paying for content and equipment needed to deliver rapid videos, its bottom line is approximately break-even.

In light of lowered cost-per-click prices and some struggling divisions, Google needs to get on the ball in order to get its profit growth back on track. Google will post its second-quarter results on Thursday, July 16, 2015.

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