It’s now another season for earning releases. With positive numbers from major companies, the media and tech sectors return to growth track along with the general economy. Despite the recession and the changing industry landscape, News Corp still generated $30.9 billion sales in 2009, which is 1.3 times Google’s revenue for the same period. News Corp is once again on the sustainable growth trajectory since the fourth quarter of 2009. Google, returning to decent growth in Q4 as well, generated $23.7 billion in 2009. But here, the interesting thing about their financials is that Google has a market capitalization of $172 billion in February 2010, while News Corp’s market value only hit $35 billion, which suggests a 7.26 price-to-sales ratio for Google and 1.13 for News Corp. So why does a company, which earns less money than the other, end up having 5 times more market value? Of course, it’s the future growth or expected growth. (Although factors such as profit margin play a role, it is the future growth that has the most impact on Market Cap.) Google clearly grows its revenue by 8.5% in 2009 over the previous year, whereas News Corp’s sales dropped by 5.5% in 2009. But given News Corp’s decent post-recession rebound in Q4 and Google’s growth deceleration for the past years, is the two companies’ difference of current growth trends big enough to make up the entire $137 billion Market Cap gap? I doubt it. The investors definitely expect way more revenues from Google in the future than it’s generating now in order to substantiate its high market value. And given Google’s heavy investment in different areas such as mobile, computer OS and social networks, there is a fairly high possibility for Google to achieve it. But here the question becomes where Google’s next Multi-billion dollar business is? Google has publicly stated that display advertising, which includes banner ads on its online properties and video ads on YouTube, will be the next billion dollar business. I have no doubt about it. But I doubt that the growth potential in display advertising is sufficient to support people’s expectations on Google. Strategy Analytics believes online video ads will be nice business in the coming years, but it is more of a traditional business model other than that of Google search ads. Search is all about aggregating users’ intention and monetizing on that, while display ads are just old-fashioned magazine types of impression selling. There is nothing wrong with the old ways of selling impression, but that is not what Google eventually aims for. Google needs a new multi-billion dollar business to go for, as the groundbreaking AdWords it has invented many years ago. Since most of Google’s new inventions are or will be free, like Android and Chrome OS, I believe that Google’s next multi-billion dollar business will remain in search, and all that Google is doing now aims to increase the world’s Internet users and usage, which will in turn make the pie of search advertising larger and larger. It remains unclear that if there will be enough advertising dollars in the market to reward Google for its research and development, but at least Google makes the world better. Jia Wu