My question is thus: is Google best served by trimming expenses and trying new types of monetization *now* or *later*? I’d actually suggest there is a good argument for doing this all later.

Trimming expenses and making more money “now” is basically too late. The economy is already sucky. It would have been nice perhaps to get lean before the market started tanking, in order to keep one’s stock price up as others’ went down with the indices (which might not have worked, besides). But since everyone’s already down so far, presumably this means that we all missed the opportunity. With all the bad news everywhere, my naive assessment is that it is “ok” to have an earnings miss now — everyone more or less expects earnings misses, and that’s priced in to everyone’s stock already. If a company makes or beats estimates — would their stock really go up that much? Everyone expects everything to get worse before it gets better, so I could imagine that beating estimates has little impact — why invest now when things probably haven’t bottomed out yet?

On the other hand, what if Google had a really or sorta poor quarter right now, but then aggressively started making more money “later”? We’d be deeper into the recession at that point, and perhaps Google would start to look like a real star compared to all the other lackluster companies that would still be slumping. Google can afford to wait out the economy for a while, especially seeing as all the original Google gang are already quite rich, and the company has something like $14 billion in cash available — so convert some of the employee compensation from stock to salary (temporarily) to keep morale up and just wait it out.

The reason I’m making this argument is because advertising without true innovation (i.e. new markets or a paradigm shift) really only has one way to go — getting worse over time. Putting “more ads” on a page doesn’t necessarily make “more money” even though the user experience deteriorates very rapidly. Advertising tends to get more invasive, more in your face… and while that might have short term boost to revenue, it certainly won’t last forever.  (Look at Yahoo search, which has 14 ads served for a search on “basket” even with only 10 results given; no wonder the company is dying)

So once Google goes down the path of, “hey quick guys, let’s monetize by putting ads where there weren’t ads before!” — you can’t really do that trick again later. It sounds like Google is choosing to do this now (Q4); it’s too bad they didn’t decide to wait and do these same actions some time “later”. That could have been a lot more impressive.