After several weeks of up and down drama on the stock market, a speck of good news finally came in the form of Google’s most recent earnings report, amidst several other indicators that investments are strengthening. Eurozone debt fears subsiding and holiday season consumer spending increasing were also considered contributions to an improved stock market situation. But as far as future projections are concerned, nothing could have made them more positive than the news that Google is continuing to see record profits, despite big risks and potential losses.
That’s because Google acts as something of a bellwether when it comes to investment. The tech giant has their hands in just about everything these days, from social networks to newly acquired rights to prepaid phone designs and releases in the form of the Motorola acquisition. One year of hefty investments and big risks resulted in Google making record profits, which says good things about such behavior in general (that you can take risks and still make a profit). With that said, not every company out there, or even one-one hundredth of every company out there, has the purse and the power of Google.
But that matters little here because what we’re talking about is investor psychology. It’s not that Google’s earnings have convinced people that they too can pour huge swaths of capital into huge risks, it’s that these earnings have convinced investors that risky business is not off the table if your mission is to make money. More importantly, however, is the fact that Google is the vital private sector component that is currently holding the rest of the free market together.
Google is not only the tool most people use to get investment information, the business successes and failures that influence investment decisions are themselves hinged on whether or not said businesses can harness the power of the Google search engine effectively. Bad earnings news from Google would suggest that the dynamics of the Internet are changing in the face of Facebook and other social media powerhouses. This would have resulted in panic from investors who have designed entire market strategies based on the role Google plays in Internet marketing.
In tough economic times, people are much less willing to engage in financial risks. This of course only escalates the problem. Seeing Google take substantial risks with Google+ and the Motorola acquisition only to see them come back as strong as ever acts as a massive amount of reassurance for everyone else. It proves that not only can risks be taken in tough economic times, they can end up not paying off as much as you hoped yet still cause stocks to strengthen. We need this kind of attitude to take over if we ever expect to make a full economic recovery.