Big Tech's woes signal wider US decline as China strikes

Google and its Big Tech buddies as seeing growth slow while costs soar, making the future look bleak - and Sundar's running out of options

A year ago, I predicted Google CEO Sundar Pichai was about to unleash a Hail Mary. He would use AI as a cover story to flood search and YouTube with ads.

My thesis was that it had saturated its market and was showing its age. Finding new customers was getting harder, so mining ads was the logical Plan B for growth.

Armed with Google’s latest financials this week, I decided to run a retrospective to see if I was right - and found a much bigger story of US decline.

Late-stage Google has indeed used three methods to maintain its revenue growth.

Strategy #1: It’s using AI to grow traffic.

Problem: It’s been so successful over 20 years that it has a 91 per cent share and has run out of customers in core markets. And it’s blocked from new ones, like China.

Solution: It’s using AI Overviews to create unlimited search results and new traffic that doesn’t rely on humans. (Meta’s doing the same with synthetic social.)

Strategy #2: It’s flooding pages with more ads.

Problem: More ads mean more interruptions, which leads to more complaints from consumers, and advertisers.

Solution: Ignore the consumers and keep AI search results on Google.com to generate more ad inventory to sell.

Strategy #3: It’s raising ad prices.

Problem: Click through rates and advertiser satisfaction is in decline. It’s even losing share in search. It’s running out of blood to drain from the stone.

Solution: Build the dominant ad solution and make it proprietary and deliberately opaque, so you can twiddle the dials to hike prices out of sight and censure.

You don’t need a $450,000-a-year analyst to figure this out, you need a $9.99 calculator.

And my analysis shows Google’s doing all three and assiduously keeping it a trillion light years from its earnings announcements this week.

So, today, let me share a series of charts that show why its willing to risk its reputation, upset consumers, piss-off advertisers, and tweak regulators.

Because under all the shiny marketing lurks a crisis…

The Malignant Seven

Google’s revenue growth is slowing, but it’s not just them. All Big Tech’s Magnificent Seven are slowing down.

It feels like the countdown in the blockbuster Independence Day. It feels ominous.

Fifty year decline

America is a comparatively small country in terms of population that’s done an amazing job over 249 years to build the world’s largest economy.

But indications are that it has peaked. Growth viewed over the past half century shows a steady decline.

Output, measured as GDP, has bounced around, but over the decades is trending down despite its dominant tech and prominent success stories.

America’s debt spike

Meanwhile, US debt has spiked alarmingly. It has been buying more than it sells, running up a sea of red on the credit card.

If the US were a household, then mom and dad would be begging for a huge pay rise or planning to sell the farm.

Viewed together, US debt as a percentage of US output has more than tripled, from 35 per cent in 1969 to 123 per cent today.

Few friends left

Google and its compadres in Big Tech can’t grow fast enough to keep the lights on.

To be fair, Google’s done an astonishing job over its quarter century at the top.

Pichai glowingly told investors: “We have seven products and platforms with over two billion users...” and that’s amazing.

But the success comes at a price, and Google has simply run out of new customers to add.

Meanwhile, the nations with huge populations that it needs to onboard are hostile, and the targets of US trade wars, meaning they are locked out.

Apple and Meta are also hopelessly exposed to the rising trade war, and the US is in a proxy war with both in the Ukraine. Google it…

Imminent break-up

When the Department of Justice hauled Google before the antitrust courts for being anticompetitive, the scoffing was deafening.

“There’s no way the US is taking its hero tech company down”, one told me. “Without Google, there’s no internet.”

Mmm hmm... That was nonsense of course, and Google was ruled an illegal monopolist. Tech Bro apologists quickly fell silent as the DoJ demanded its break-up.

Given that’s the single most important issue facing Google, you’d think it would be front-and-centre of the latest earnings call. Wouldn’t it? But no, not a mention.

“The company is in a great rhythm and cadence,” said Pichai, “building, testing and launching products faster than ever before.

“This is translating into product usage, revenue growth and results.”

Yay! If jazz hands ever becomes an Olympic sport, he’s going for gold.

Amused, I scoured LinkedIn for commentary. Nothing. Crickets. I swear, this is the Voldemort of Big Tech.

But let’s be real. It’s going to rip the guts out of the company.

Hump v slump

Google’s headlines are causing the Death Valley of stock movements. It’s up and to the right overall, but what investors like most of all is certainty - not this.

Slump #1: October 30, 2024, and Google’s quarterly earnings reveal revenue up 15 per cent.

Only, hours later, workers file a suit claiming they’re gagged from discussing the antitrust losses.

And Russia follows up, fining the company a symbolic $20 decillion (a real number but not a real threat) for refusing to restore suspended YouTube accounts.

Down the stock went…

Slump #2: November 1, 2024, and Google freaks out Wall Street with the announcement it’s spending $75 billion on AI in 2025.

That’s a dollar every 0.42 milliseconds, or $142,694 every minute, and represents the GDP of Panama, and close to the entire value of Airbnb. A year!

Slump #3: November 19, and Ukraine uses US rockets to attack Russia for the first time. It sparks a stock rout and Google is caught in geopolitical crosshairs again.

And now slump #4, a crunching fall, vaporising $180 billion in value in one day. Youch!

These are the numbers that caused it:

Full year revenue in 2024 was $350 billion, up 14 per cent year on year.

And in Q4:

• Google search ads rose to $54 billion, up from $48 billion the year before.
• YouTube ads hit $10.4 billion, up from $9.2 billion (+14 per cent) on last year.
• YouTube’s growth was due to a significant increase in ad load.
• That included showing ads when users pause videos, as exposed by El Pais.
• Overall, Google ad revenue for the quarter was $72.4 billion, up from $65.5 billion.
• Google cloud revenue was up 30 per cent, to $12 billion.

But that 30 per cent bump was slower than previous quarters, and in the era of AI, when everyone is meant to be sucking up data - that shook investor confidence.

Then:

• Google has developed a debilitating dose of DeepSeek, with the Chinese start-up having the temerity to suggest it can do AI just as well for a fraction of the cost.
• It has an upcoming court case, which I revealed in a scoop last week, where it will face allegations that it deliberately deleted millions of chats that were evidence in the antitrust trials, plus…
• A little bit of Xi Jinping pong and the US trade war, and that’s quite a to-do list.

It all suggests a shift from being a capital-light, high-margin ad business into a spend-hungry AI wannabe to keep its status. That means, well, it means it’s becoming IBM.

Oh, and China.

First, 2025 is the Year of the Snake in Chinese astrology, so I did some reading up…

Turns out the snake symbolises wisdom, intuition, transformation, and mystery. People born in a snake year are analytical and resourceful, but secretive and calculated.

And believed to be lucky with money.

Awesome.

Each snake year is also influenced by one of five elements: Wood, Fire, Earth, Metal, and Water.

2025 is the wood snake which creates additional impetus around being creative, visionary, and idealistic.

Roll back the years to 1965, the last year of the wood snake, and that year China:

• Expanded its nuclear program after detonating its first atomic bomb months before. It’s the year China became a self-reliant nuclear power.
• China accelerated its space programme, setting the groundwork to becoming a super-power in satellite technology.
• Completed its first hydroelectric dam, Liujiaxia, delivering energy, irrigation, and flood control to five million people living on the Yellow River.
• Formulated hybrid rice strains that increased food production and provided food security for millions, and would you know it…
• Massively expanded research into semiconductors, laying the foundation of the electronics and digital industries challenging Google and Big Tech today.

ChatGPT concluded:

2025 is a Wood Snake year, meaning a period of growth, innovation, and transformation.

It may bring advancements in technology, a focus on long-term planning, and increased interest in sustainability.

However, it could also be a time of cunning negotiations and strategic power plays in politics and business.

Ha, no shit!

Let me end with this.

A day or two late, China’s state-run media has begun to cover the antitrust case it brought against Google on Tuesday. Xinhua reported:

The antitrust investigation may be linked to Google’s Android operating system business, wrote Professor Zhang Chenying from Tsinghua University School of Law.

Since Google ceased its search services in the Chinese mainland in 2010, its operations in the country have been relatively limited, primarily involving the provision of the Android operating system to Chinese smartphone manufacturers, she said.

Zhang pointed out that Google's Android operating system has maintained its position as the world's largest mobile operating system since 2012, holding an absolute advantage in the market.

Approximately 70 percent of smartphones worldwide are produced by Chinese manufacturers, however, most of them rely on Google's Android operating system.

Zhang further highlighted that Google has leveraged its dominant market position in terms of the Android mobile operating system to impose various technological and commercial restrictions on Chinese smartphone manufacturers - such as using partnerships with hardware and software manufacturers, as well as overseas telecommunications operators, to require pre-installation of its entire suite of applications.

These restrictive measures, combined with Google's products and services such as app stores and search engines, have created a powerful commercial ecosystem in the mobile internet era.

This not only strengthens Google's monopolistic position in the mobile operating system market but also excludes and restricts competition in related markets, hindering industry innovation and development, the scholar explained.

The scholar added that China's mobile communications industry has strong production capabilities and a vast market advantage, providing a solid foundation for the development of new mobile operating systems and the creation of a more vibrant commercial ecosystem.

Strengthening oversight of multinational monopolistic behavior and urging Google to revoke unreasonable restrictions and practices will help establish a more equitable and reasonable international market competition order, she said.

“It will also enable Chinese enterprises to participate more effectively in global market competition and cooperation - and inject new momentum into industrial innovation and global economic development,” Zhang concluded.

Does that sound like a goodbye, or is it just me?

Oh, footnote: In better news, Google has decided not to use AI to create nuclear weapons. Nope. I read that wrong. It’s removed its NOT to use AI for nukes.

FFS!