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At Android Trial vs. Oracle, Documents Reveal Google's Past Projections

Reuters  |  By Posted: 04/25/2012 5:59 pm Updated: 04/26/2012 10:18 am

By Dan Levine and Alexei Oreskovic

(Reuters) - Google Inc projected in 2010 it would get more than 35 percent of its 2013 revenue from outside its flagship search operation, anticipating three non-search businesses, including commerce, would generate more than $5 billion each, according to internal company documents filed in court.

The documents provide a rare insight into Google's mindset and reflect the Internet company's ambitious plans to expand into new markets, underscoring the challenges it has faced in its efforts to break its reliance on its search business.

Online commerce and an initiative to bring Google services to television were important pillars of Google's growth plans at the time, the documents show. But analysts say neither appear to be on track to deliver the kind of pay-off Google expected.

"Google TV and commerce ambitions look aggressive compared to what we believe they are today," said Susquehanna Financial Group analyst Herman Leung, who reviewed the Google documents.

The projections for Google's various businesses were part of a presentation to Google's board of directors compiled by company staffers in October 2010. They were revealed during the high-stakes trial of Oracle Corp against Google over smartphone technology.

Google attempted to convince U.S. District Judge William Alsup to keep the internal documents secret, but Alsup denied the request in court last week.

Google spokesman Jim Prosser said on Wednesday the documents do not represent current thinking about its business operations.

"Our industry continues to evolve incredibly fast and so do our aspirations for our various products and services," he said.

Still, the presentation provides a window into Google's strategic thinking at a time when the Web's dominant search engine was facing competitive pressure on numerous fronts.

Google highlighted the emerging threat from an alliance between social networking service Facebook and Microsoft's Bing search engine, noting that "Facebook-Bing users may bypass Google." Google also said revenue from its business selling software to companies was "disappointing."

Oracle has accused Google's Android mobile operating system of violating its intellectual property rights. An Oracle spokeswoman declined to comment on the internal Google projections.

Oracle attorney David Boies briefly referred to the documents on Wednesday while questioning Android mobile software chief Andy Rubin, but Boies did not delve into the projections. However, a full copy of the internal documents has been formally admitted into evidence in the case.


Google's YouTube business was estimated to generate $5 billion by 2013, thanks to a $3 billion contribution from Google TV, a then-new product that allows consumers to access Google services such as search and YouTube videos on their television screens.

But analysts say Google TV has failed to catch on with consumers. Logitech, one of Google's initial partners that developed a set-top box offering the service, said in November it would cease making Google TV devices. In January, Google announced plans for new devices from LG and Samsung.

Google projected that commerce, a category that includes sales of digital content and mobile payments as well as product ads, would deliver $5 billion in revenue in 2013.

Google had forecast its total revenue in 2013 would be $55 billion, according to the documents, with $34 billion in revenue from its search business.

Eric Schmidt was Google's CEO at the time the documents were created. In April 2011, Schmidt handed the reins to Google co-founder Larry Page, who has moved swiftly to pull the plug on projects that are not paying off while focusing efforts on opportunities including mobile, social networking and display advertising.

Google's efforts to tap new revenue have been closely watched by investors, eager for new growth as the search business matures yet wary of initiatives that threaten margins. Shares of Google, which closed Tuesday's regular trading session at $609.72, are down roughly 6.6 percent in 2012.

Google was also optimistic about its plans to enter the music business. In a separate set of documents in the case, the company forecast music sales would drive Android revenue to $3.7 billion in 2013.

Estimating the ratio of Google's search and other businesses is complicated because of the limited information Google discloses about its various businesses. Analysts' estimates for Google's non-search business currently range from 10 percent of the company's revenue to as much as 25 percent.

"Their core business has done better than they were forecasting. Search is growing faster than 10 percent a year," said Colin Sebastian, an analyst at RW Baird.

Google still has work to do in areas like commerce, he said.

The 2010 documents show Google's search business generated $19.2 billion in 2009, while the display business brought in $3.2 billion that year. YouTube made $300 million, while e-commerce brought in no revenue.

The case in U.S. District Court, Northern District of California, is Oracle America, Inc v. Google Inc, 10-3561.

(Additional reporting by Alistair Barr; Editing by Edwin Chan, Phil Berlowitz and Paul Tait)

Also on HuffPost:

Take a look at some of Google's most experimental projects.
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  • Gmail (2004)

    The now-ubiquitous Gmail -- Google's email product -- was unlike any previous email service when it was introduced <a href="" target="_hplink">in 2004</a>. It featured way more storage space (1 GB per user), search capability within your email, and conversion view, which groups together all replies to the original message to keep the conversation in a single thread. It also included a built-in chat service. <em>CORRECTION</em>: An earlier version of this slide stated the Gmail was launched in 2007. It was actually launched in 2004.

  • Google Mars (2006)

    Google worked with NASA researchers to create a detailed, digital map of the planet Mars. <a href="" target="_hplink">Google Mars</a> works similarly to Google Earth -- except you're navigating around a far-off planet. Users can explore regions, mountains, plains, canyons, craters and other elements.

  • Google Sky (2007)

    <a href="" target="_hplink">Google Sky,</a> the outer space version of Google Earth, is a way to explore the sky from your computer or mobile device. Click the Sky button on the Google Earth toolbar and you can see constellations, the moon, the planets, and user guides giving information on each. And, of course, there's a search bar to locate whatever part of the sky you're looking for. If you're unfamiliar, <a href="!" target="_hplink">this YouTube video</a> gives a good guide.

  • Google Reader (2007)

    <a href="" target="_hplink">Google Reader</a> is a web-based news aggregator. It utilizes RSS feeds and included sharing capability until October, 2011, when this feature was <a href="" target="_hplink">disabled and replaced</a> with a Google+ button.

  • Google Moderator (2008)

    <a href="" target="_hplink">Google Moderator</a> ranks user-submitted questions that come in during an online discussion. It was first created to help moderate the company's tech talks, and was later used by President Barack Obama's team to sift through Americans' questions for the newly elected president. It works like this: Participants can submit questions or ideas, and other participants vote on them. This crowdsourcing technique helps identify the questions and ideas with the most support or interest from the group.

  • Google Body (2010)

    Google Body allowed users to navigate through 3D anatomical models of the human body. Google Body ceased operation in Oct. 2011 -- when Google Labs shut down -- and will relaunch as Zygote Body. <a href="" target="_hplink">Zygote Body</a> will be a searchable, interactive 3D model of human anatomy. Check out this video for a look at the former Google Body.

  • Google Docs (2010)

    <a href="" target="_hplink">Google Docs,</a> a web-based office suite that includes word documents, spreadsheets and other formats, was innovative for a few reasons. One, the documents are accessible from any computer or device. Two, they're collaborative: You can share documents with coworkers or friends and read or edit them simultaneously. The docs also automatically save as you go, protecting the work from browser crashes or other accidents. Google Docs is a combination of two previous company projects: Google Spreadsheets and a web-based processor, Writely. There have been several iterations in the past five years, with the mostly completed version announced in 2010.

  • Google Goggles (2011)

    <a href="" target="_hplink">Google Goggles</a> is on the cutting-edge of visual search. The product enables users to search with images instead of words -- basically you take a picture of something, and Google will recognize it and pull up search results on it. <a href="" target="_hplink">See a demonstration here</a>.

  • Google X (2011)

    A November <a href="" target="_hplink"> <em>New York Times</em> piece</a> gave a glimpse into Google's super-secret "Google X" lab, where the company is dreaming up innovative ideas for the future, like elevator that goes to outer space, driverless cars, and all manner of robots. In January 2012, Google announced an experimental lecture forum called "<a href="" target="_hplink">Solve For X</a>," with an aim at solving "moonshot thinking." As Google <a href="" target="_hplink">explained in a blog post</a>, the project will "take on global-scale problems, define radical solutions to those problems, and involve some form of breakthrough technology that could actually make them happen."

  • Chrome Experiments

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