Google's Page Needs to Say Right Things

BOSTON (TheStreet) -- All eyes are on Larry Page as Google(GOOG) reports earnings after the closing bell today.

Page is a co-founder who replaced Eric Schmidt as CEO April 4, ending a 10-year reign. Google also lost its senior vice president of product management, Jonathan Rosenberg, who had close ties to Schmidt. Page had asked his senior executives to make long-term commitments to remain at the Internet search company, and Rosenberg couldn't do so. Page also completed a major reorganization, placing key executives under his direct supervision, eliminating management layers and allowing business divisions to be more autonomous.

Page hasn't been shy about his desire to turn around the "social" future for Google. In a somewhat desperate plea to employees, Page announced that bonuses would be tied to the success or failure of Google's social strategy in 2011. Maybe Google's new "+1" feature (basically a "like" button with a "1" on it) should indicate that Facebook is obviously on the mind of Google. It's clear that Google doesn't quite get "social" (think Orkut, Google Wave or Google Buzz) and that, maybe, just maybe, the company should focus on its core businesses: search and, now, the Android wireless operating system. If social is so important to Google, the best strategy might be to go for one of the leaders -- namely, Twitter -- which at its estimated value of $10 billion would be easy for Google to swallow.

As for first-quarter earnings, investors are expecting revenue of $6.4 billion (27% growth from 2010) and earnings per share of $8.13 (20%). Most sell-side firms are bullish on Google, with 35 "buys" and eight "holds," with an average price target of $733. The stock has struggled this year (-4% versus +4.5% for the S&P 500). Most Google investors would be happy if the company at least slightly beat earnings expectations. But what's more important is a clear strategic vision from Page for what's to come at Google.

Management comments on search strength and display advertising will be a key point for the conference call. Google remains far and away the leader at 65.4% of search totals, yet the market share for Microsoft's(MSFT)Bing, at 13.9%, has been inching up and could cut into Google's margins. According to a recent report by Efficient Frontier, the return on investment (or ROI) for Bing users is currently higher than Google's. Bing's ROI has increased 10% this past year, while Google's ROI has decreased by 12%. This could lead to a shift in advertising dollars from Google to Bing, and a decrease in search-market share for Google.