What Do Google’s 55,030 Employees Do?

The basic information for the quarter just ended:

Google Inc. reported consolidated revenues of $16.52 billion for the quarter ended September 30, 2014, an increase of 20% compared to the third quarter of 2013. Google Inc. reports advertising revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the third quarter of 2014, TAC totaled $3.35 billion, or 23% of advertising revenues.

Net figures were less impressive:

GAAP consolidated net income in the third quarter of 2014 was $2.81 billion, compared to $2.97 billion in the third quarter of 2013.

The primary cause of anxiety:

Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our Network members, increased approximately 17% over the third quarter of 2013 and increased approximately 2% over the second quarter of 2014.

Analysts expected the improvement to be closer to 22%.

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Lost in some of the criticism was that Google’s top line was 20% higher, which is extraordinary for a company its size. Google’s margins are equally impressive. However, what the market can fairly ask is what 55,030 people do?

Among the positive answers is that this staff supports and improves Google’s two most important businesses — search and its nearly ubiquitous Android operating system. However, Android’s growth has been a mixed blessing because Google has trouble pointing directly to contributions it makes to revenue. The theory seems to be that as more consumer electronic devices use Android, Google’s search gets dragged along onto those devices.

Some of the 55,030 spend their time working on Google’s applications for work, which were meant to compete with Microsoft Corp.’s (NASDAQ: MSFT) Windows but never did. Google Earth and Google Maps are considered leaders in their respective segments, but the search company cannot assign any revenue component to them. The same is true of Google+, meant to compete with Facebook Inc.’s (NASDAQ: FB) core product.

Google management argues that it needs thousands of people to experiment and create code and products for the future. In the future, these products will pay off, they say. However, Google’s track record in this area has been a nearly complete failure. That begs the question of what those 55,030 people do, other than add to expenses.

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