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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