Google Payments And Commerce Vision

“The way to win this in the long term, is simple, you just make wonderful products. When you make wonderful products that are magical people will find them.”

If one were to poll 100 industry insiders about which tech firm’s CEO said the above quote, it is doubtful very many would offer Google’s CFO Patrick Pichette as their first guess. A search of the first 100 results of a Google search of “Google + “magical” yielded exactly zero results where a product or service of Google’s was referred to as magical. In every instance where the terms appeared in an article together, the word “magical” used to refer to a non-Google product, usually one made by Apple.

But in fact the above quote did come from Pichette during Google’s Q4 2014 earnings call yesterday (January 29) – and while it may be somewhat hard to imagine Google’s magical future, yesterday’s call and earnings results did speak to a company that is evolving quickly towards a different “m”word – mobile.

Google is still making billions in its desktop ads business, but earnings for Q4 missed analysts projections. Revenue (minus traffic acquisition costs) was $14.48 billion, compared to the $14.61 billion that was projected. Gross revenue was $18.1 billion, also missing its $18.45 billion forecast. The majority of revenue derived from ads, at $16.2 billion for the quarter, was up about $2 billion from 2013. But Google’s future in the mobile world remains an open question, as advertising on mobile devices doesn’t deliver the revenue that advertising on the desktop does.

But since the future of advertising (and so many other things) is mobile, Google’s hope for mobile’s potential remains high.

“Mobile is now a behavior, not a device, and it has a variety of unique characteristics,” Google Chief Business Officer Omid Kordestani noted on the earnings call, before running through the various ways Google is leveraging mobile to deliver a product more tailored to mobile’s strengths.

“On mobile, consumers want to know about the stores and goods near them,” he noted, before touting the Q4 launch of local inventory ads that allowed customers to see what goods were available in a store near them.

“Major retailers like Macy’s and REI took advantage of these local inventory ads during the holidays and on the whole we saw strong engagement and results from big box retailers during the holiday season.“

Google, being Google, also highlighted the increased visability into consumer data their products offer, particularly as it relates to shopping experiences in the real world.

“We recently added estimated store visits to our estimated total conversion measurement suite. Now an advertiser can see a reliable estimate of the number of times a searched ad click yielded a store visit,” Kordestani said, further noting that the data so far shows that ads clicked yielded store visits 12 percent of the time. He also touted strong growth in Google’s e-commerce efforts
“Online growth remains strong with Google Shopping traffic on mobile devices up nearly 100 percent from Q4 2013. Mobile shopping clicks exceeded those on desktop as users increasingly made purchase decision on the go.”

Strong growth was also Kordestani’s theme when talking about the growth on YouTube, which has climbed 50 percent in the last year to 1 billion.

“Mobile revenues on 100 percent YouTube is up year over year,” he told investors, while also pushing the merits of YouTube’s True View format, where merchants are only charged for the commercials that people actually watch.

“Walmart’s US holiday performance is one of our many success stories. During the week of Black Friday 2014 they used YouTube’s True View format to drive a 300 percent week over week increase in views of their channel, and more than 28 million views on the week. This is a 600 percent increase in channel views over the same week in 2014.”

While Kordestani focused on the growth of these service areas however, he did not mention that these rapid rates, while encouraging to investors, are also are a testament to how much room these areas had to grow into. A 100 percent increase is rarely bad news, but a 100 percent increase of a small number is still probably still a relatively small number.

While Google had a fair amount to say on it’s mobile commerce ambitions, it had very little to share about its mobile payments plans. Neither Kordestani or Patrick Pichette had anything specific to say about Google Wallet in their prepared remarks. When asked about it by an analyst, Kordestani was cheerful, if vague.

“Really our focus [is to] turn consumer’s shopping intents into actions simply and easily…On payments the goal is to remove all the friction that one encounters in the shopping experience and what we’re really working on here is a move beyond tap and pay to having a full and functional payments system. Today you can move money to friends through Gmail using the Wallet app and we just made the functionality available in the UK. Loyalty and gift cards can be stored on the Wallet app, the Buy With Google option makes it possible for users to buy with two clicks. So, really we’re focused on building a rich offering here to make it easy to shop and pay and remove the friction.”

The payments question surfaced again at the end of the call, when an analyst, perhaps seeking an answer to Karen Webster’s question about who is going to build “Android Pay” was asked

“Could you tell us what your strategy is in digital payments and is there way you can leverage Android to develop a differentiated product in the market?”

Kordestani more or less repeated the exact same answer about creating a frictionless experience, but did note that they believe that the increasing rates of NFC acceptance will really help Android expand in the market.

“We’re really getting closer to broad merchant acceptance,” he noted.

Google has unfortunately gotten into a habit recently of missing analyst expectations, though investor reactions to the news yesterday was essentially non-existent – the stock ended the day up two percent. Still, Google does seem to have its challenges with mobile, especially as Facebook is stepping up to be a very active competitor in the mobile ads arena. And as consumers increasingly are presented with new and different ways of searching for information that don’t require Google to assist them in that search.

Google owned almost 50 percent in 2013, but recent data indicates that this will decline to 46.8 percent in 2014 as Facebook takes up a growing portion of the market.

Perhaps it’s time for a little mobile magic, after all.