Google Inc projected in 2010 it would get more than 35 percent of its 2013 revenue from outside its flagship search operation, anticipating three non-search businesses, including commerce, would generate more than $5 billion each, according to internal company documents filed in court.
The documents provide a rare insight into Google's mindset and reflect the Internet company's ambitious plans to expand into new markets, underscoring the challenges it has faced in its efforts to break its reliance on its search business.
Online commerce and an initiative to bring Google services to television were important pillars of Google's growth plans at the time, the documents show. But analysts say neither appear to be on track to deliver the kind of pay-off Google expected.
"Google TV and commerce ambitions look aggressive compared to what we believe they are today," said Susquehanna Financial Group analyst Herman Leung, who reviewed the Google documents.
The projections for Google's various businesses were part of a presentation to Google's board of directors compiled by company staffers in October 2010. They were revealed during the high-stakes trial of Oracle Corp against Google over smartphone technology.
Google attempted to convince U.S. District Judge William Alsup to keep the internal documents secret, but Alsup denied the request in court last week.
Google spokesman Jim Prosser said on Wednesday the documents do not represent current thinking about its business operations.
"Our industry continues to evolve incredibly fast and so do our aspirations for our various products and services," he said.
Still, the presentation provides a window into Google's strategic thinking at a time when the Web's dominant search engine was facing competitive pressure on numerous fronts.
Google highlighted the emerging threat from an alliance between social networking service Facebook and Microsoft's Bing search engine, noting that "Facebook-Bing users may bypass Google." Google also said revenue from its business selling software to companies was "disappointing."
Oracle has accused Google's Android mobile operating system of violating its intellectual property rights. An Oracle spokeswoman declined to comment on the internal Google projections.
Oracle attorney David Boies briefly referred to the documents on Wednesday while questioning Android mobile software chief Andy Rubin, but Boies did not delve into the projections. However, a full copy of the internal documents has been formally admitted into evidence in the case.
FAILED TO CATCH ON
Google's YouTube business was estimated to generate $5 billion by 2013, thanks to a $3 billion contribution from Google TV, a then-new product that allows consumers to access Google services such as search and YouTube videos on their television screens.
But analysts say Google TV has failed to catch on with consumers. Logitech, one of Google's initial partners that developed a set-top box offering the service, said in November it would cease making Google TV devices. In January, Google announced plans for new devices from LG and Samsung.
Google projected that commerce, a category that includes sales of digital content and mobile payments as well as product ads, would deliver $5 billion in revenue in 2013.
Google had forecast its total revenue in 2013 would be $55 billion, according to the documents, with $34 billion in revenue from its search business.
Eric Schmidt was Google's CEO at the time the documents were created. In April 2011, Schmidt handed the reins to Google co-founder Larry Page, who has moved swiftly to pull the plug on projects that are not paying off while focusing efforts on opportunities including mobile, social networking and display advertising.
Google's efforts to tap new revenue have been closely watched by investors, eager for new growth as the search business matures yet wary of initiatives that threaten margins. Shares of Google, which closed Tuesday's regular trading session at $609.72, are down roughly 6.6 percent in 2012.
Google was also optimistic about its plans to enter the music business. In a separate set of documents in the case, the company forecast music sales would drive Android revenue to $3.7 billion in 2013.
Estimating the ratio of Google's search and other businesses is complicated because of the limited information Google discloses about its various businesses. Analysts' estimates for Google's non-search business currently range from 10 percent of the company's revenue to as much as 25 percent.
"Their core business has done better than they were forecasting. Search is growing faster than 10 percent a year," said Colin Sebastian, an analyst at RW Baird.
Google still has work to do in areas like commerce, he said.
The 2010 documents show Google's search business generated $19.2 billion in 2009, while the display business brought in $3.2 billion that year. YouTube made $300 million, while e-commerce brought in no revenue.
The case in U.S. District Court, Northern District of California, is Oracle America, Inc v. Google Inc, 10-3561.
(Additional reporting by Alistair Barr; Editing by Edwin Chan, Phil Berlowitz and Paul Tait)