It was Larry Page who penned the famous Founders’ Letter that accompanied Google’s IPO prospectus. In it, he promised that he and Sergey Brin would have the “fortitude” to keep investing for the long term and not “shy away from high-risk, high-reward projects because of short term earnings pressure.”

Mr Page is now CEO – and Wall Street has just had an unpleasant reminder that he really wasn’t kidding.

Google’s first quarter numbers included some real eye-openers. A 71 per cent increase in sales and marketing costs and a 58 per cent jump in research and development, for instance. Even with a company-wide pay raise and acceleration in hiring, increases like these point to a sea-change in the company’s margin structure.

As it ramps up spending on its mobile and Web platforms and squares up to Facebook in social networking, Google is facing an expensive slog. Android and the Chrome browser always looked like defensive strategies: it was never clear what direct impact they would have on revenues, though at least both have strong momentum behind them. But the value of the Chrome operating system is becoming increasingly doubtful, particularly since it looked too far ahead of its time when it came out in test form last year and is put further in the shade by Android every day.

What’s ironic is that Google had only just started to convince Wall Street that some of its earlier big bets, like the acquisitions of DoubleClick and YouTube, were starting to pay off.

At a time like this, it isn’t enough just to repeat the old rhetoric, that out-sized long-term opportunities justify out-sized investments in the short term. Nor did it help that Mr Page himself barely deigned to turn up for the first earnings call since he took over, not even mentioning the issue of costs in his brief remarks and not taking any questions.

Investors aren’t necessarily averse to a period of higher investment. What they hate is the thought that costs are getting out of control as the company fights on multiple fronts at once, with no end in sight and no idea of how the cost structure of the company will finally settle down.

The “just trust us” approach that Google has adopted with Wall Street in the past doesn’t work at a time like this. Its shares are likely to stay under a cloud until either the cost growth levels out or it can find a better way to explain what is going on.

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