Searching for ideas

Beware a big and impatient Google. The internet search giant's third-quarter results suggest the transition to mobile and growth in video are humming along. The steady success, though, may be boring Chief Executive Larry Page. He says he may skip future calls with investors and that Google is struggling to invest in new ideas fast enough. The real danger is the allure of deals that suit the scale of a $300 billion company.

Google is churning out impressive figures. Total revenue rose 12 per cent in the period from a year ago. And even that understates Google's success. Internet sales, net of fees to partners, grew 23 per cent while the bottom line swelled by 36 per cent.

Growth looks set to continue, too. While advertisers are still reluctant to pay top dollar for mobile advertising, there are increasing signs prices should rise. People can see such ads while they're shopping and also make it easier for them to call merchants. That leads to the higher conversion rates advertisers crave. And more devices are leading to more time spent with other Google services. About 40 per cent of YouTube is now watched on smartphones or tablets.

The company itself seems to be searching for a bigger challenge. Page said it's hard to motivate employees to spend enough on long-term research and development. He expressed a desire to know how to deploy meaningful amounts of money on speculative investments. The cost of the company's new Calico biotech venture, for example, is largely immaterial given Google's size and its $8 billion annual R&D budget.

Google's dives into alternative energy, self-driving cars and internet access using balloons could have giant payoffs for the company and society. Page concedes, however, that it will take a lot of effort and time for marketable inventions to emerge. Bureaucracy and infighting tend to retard innovation in companies as large as Google.

That means it will need some serious willpower to resist the temptation of trying to buy innovation. The $12.5 billion acquisition of Motorola to get into hardware production is a case in point. Sales in the division are falling and losses mounting. It's admirable that Google is so anxious to find the next big thing. Big deals, though, probably would only provide a shortcut to capital destruction.