Can Google continue to maintain excellent earnings growth while increasing the quality of search?  As successful and profitable as she is – Google has a big challenge ahead of her.  The bulk of her revenue is generated via online advertisements.  In addition to the advertisements generated by Google searches - websites ranging from hobby businesses to huge corporations offer Google advertisements to the public on a daily basis.  Each time a user clicks on one of these advertisements – Google earns money.

Although this sounds fairly straightforward – there’s usually a “catch” to everything.  While Google offers the ads – she is also responsible for determining the rankings of each website carrying those ads.  What does this mean?  Essentially, Google has a potential “conflict of interest” on her hands.  Think about it like this.  Suppose Google wanted to maximize short term revenue by increasing the visibility of all the websites carrying her advertisements – she could easily increase the rankings of those websites – generating more revenue from the ads.  Would she do this?  Google does have an official policy in place which basically says websites carrying advertisements supplied by Google won’t receive a higher ranking than those not carrying those advertisements.  Obviously, there is no reason to question this policy statement.

Often people view Google as an internet search engine without much thought about its identity as a large, publically traded corporation with tremendous expectations from shareholders and upper management to maintain earnings growth – maximizing shareholders wealth.  Make no mistake, Google is a business – and corporate profits come before anything else.  Often you’ll see SEO experts taking shots at Matt Cutts (the head of Google’s Webspam team).  However, I don’t believe those people fully appreciate the circumstances under which he operates.

Google leads the market in search engine dominance for one reason – they offer the most relevant search results.  Going forward, the big challenge for Google will be the manner in which they walk the line between pushing websites offering revenue potential vs. the quest to offer highly relevant search results.  In a way, it reminds me of problems encountered by the U.S. automobile industry a number of years back.  Would they sacrifice earnings to increase quality – enabling them to compete with Japanese imports?  Or, would they wait until it was almost too late – greedily pushing earnings at the expense of quality?  Everyone should know the answer to that one.  How will Google handle the challenge?  Let’s hope they do better than the US automobile manufacturing companies.