Yesterday evening, Google announced its latest quarterly results.

- Profits were up 110% to $721m in the three months to the end of June, the company told investors after the stock market closed in New York last night.
- Revenues were up 77% to $2.46bn, while the proportion of income from outside the US increased from 39% to 42%.

The figures underlined Google’s dominance of the web search market.

In May the firm had a 62% share of global search traffic, up from 55% a year earlier.

A Fickle Bunch

You would think investors would be ecstatic, especially in light of the fact that Yahoo! had disappointed investors earlier in the week.

The stock was initially down in after market trading.  It bounced back but despite the torrid growth, the stock was only up a couple of dollars, less than 1% today.

Frankly, Google’s growth did slow down, and yes, the company’s capital expenditures were off the chart.  Furthermore, none of the new Google products have done much to dethrone their respective competitors (Base /  Craigslist; Gmail / Yahoo, MSN; Maps / AOL Mapquest, Yahoo Maps, etc), but the company is showing that it is the uncontested champion in search, the much vaunted sub-industry.  Search is seen to be so important that investors punished Yahoo! for a one month delay in a product that may or may not improve its margins.  Yet, despite Google’s dominance in search, shareholders felt that Google should do more.

Beating Expectations 

This is problematic for Google in the upcoming months and years.  The reason why it is so is that investors seem to no longer be interested with what Google does - and that is alot.  They seem to now be interested with how much more Google does than expected.

With a market cap hovering at $120 billion and an enterprise value of $110 billion, Google can not do more than it does in search.  After all, while Google’s share in search queries went up, so did Yahoo! and MSN in the same period.  This means that Google will eventually see its market share level off.  So unless it can increase its cost per clicks prices (CPC) it charges advertisers and increase its click through rates (CTR) to these ads, it will see its wow factor be reduced.

Show me the Money 

Now, more than over, Google needs to start delivering on its other products.  Up to now, it could get by by being a search story, but investors clearly want an ROI on those large capital expenditures.

Loud Sucking Noise

In fact, over the past quarters, market values in eBay, Yahoo! and company has gone down, and many could argue that this is because every new product Google launched led investors to think and conceptually transfer a portion of the targeted companies’ market share to Google.

Google has in the past failed in one category: investor relations.  Frankly, the people in charge of IR have probably done a more than great job, but the market’s expectations have been so lofty that Google now finds itself in the precarious position of not being able to wow the market anymore.

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