Later today Tomorrow when Google announces its first quarter earnings after the markets close, we are finally going to find out whether all the sturm und drang about Google’s seemingly-flat growth of clicks on search ads is a bad as everyone thinks. Already, Wall Street is bidding the stock up more than 2 percent in midday-trading in the hopes that it was oversold this past week on fears of weakening revenue growth. Those fears are fueled by the latest comScore figures, which estimate that paid clicks in March grew only 2.7 percent, and 1.8 percent for the quarter. The flattening became an issue back when comScore reported its estimate for January growth to be 0.3 percent. Never mind that in the past there has been a very uneven correlation between comScore’s estimates and Google’s actual revenues. Or that changes in the format of the ads meant to reduce accidental clicks (and thus improve the percentage of clicks that lead to actual sales) might account for the part of the decline.
Adding more fuel to the fire is a report put out yesterday by search-ad optimization company SearchIgnite which estimates that Google’s market share of search ad spending actually declined in the quarter to 70.4 percent from 74.5 percent in the fourth quarter of 2007. (And Yahoo’s share supposedly went up from 19.6 percent to 24.2 percent). The problem with this report is that there is no way of telling how representative it is of Google’s total business. It is based on the ad-spending habits of SearchIgnite’s 500 customers, who collectively spent only $300 million during the quarter on search ads across Google, Yahoo, and MSN.
We’ll find out soon enough if these fears are justified or if they are overblown. We’ll also find out if its social networking ad inventory is still dragging down the numbers. The current consensus revenue estimate is $3.61 billion for the quarter and $4.52 earnings per share. Who thinks Google will come out stronger than expected? Or will the shares sink again tomorrow?
Google reports on THURSDAY not tonight…
Market is up 2% overall right now. I think that Google is just moving with the indexes until earnings.
I’m really curious as to what the cause of this decline is (if there is a decline). I would be shocked if a 30%+ decrease in growth over last year is the result of simply changing the clickable area, but you never know I guess…
Check your post for grammar: “declined in the quarter from 70.4 percent from 74.5 percent.” Also, results are Thursday not today. Flat out embarrassing.
Here’s my take on Google: Revenue and earnings will both be below consensus because of a number of factors:
1. Reduced experimentation and new advertisers. Google makes a lot of money from n00bs who waste a year’s budget in a month on stupid word buys – as more people have tried Google, there are less n00bs to pad income AND increase click costs – I think we’ll finally see the turning point this quarter.
2. Algorithmic changes – the changes to Adsense have had the largest impact (as seen in click through rates) but the corresponding increase in cost per click may never materialize – because true clicks rarely result in a sale anyway.
3. Recessionary tendancy toward brand building rather than pushing the sale. Google is horrible at “brand building” aka display ads – people are supposed to buy stuff after clicking on an ad. During a recession, this dries up significantly, so you have people who are searching for stuff “they wish they could buy” and click on ads accordingly, without ever buying stuff. Display ads work much better because the CPM is lower and the brands are maintained/built and get stronger for the next upturn in the economy. In this environment, yahoo/ms would be a better pick for advertisers
4. Costs related to double-click acq. Not significant, but will still reduce their investment income for the quarter substationally due to decreases in cash base.
5. Increased labor costs and overhead to support non-revenue generating projects that have grown exponentially since last year.
We shall see…
I’m looking for a Google beat on earnings
1. paid clicks comscore alone is NOT an indicator of revenue/profits
2. Consensus among many sources is that internet advertising is UP, and that Google continues to take market share
3. Weak dollar, and strong international sales
4. Most importantly – GOOGLE is a business built on SCALE. The business scales very well, ( i.e. MSFT and YHOO in the same business but with less scale, hence they are not doing as well )
all studies show that the search business has grown ( 15 billion searches on all google properties in march 2008 ).
I think some of the move is based on the discounted cash flows from the potential that Yahoo, the internet’s largest property group, might move to Google ads.
That out weights all the bad news lately.
sell on the hype….
This happens EVERY single time during earnings. Either expectations leading up to earnings are way too high, thus anything that meets expectations or doesn’t beat by enough sends the stock down.
In this case, expectations have been only going lower, and Google would have to put out some really crappy numbers for the stock to stumble any lower.
it happens for every company that’s heavily followed… Intel, Apple, so on so forth..
besides, many on wallstreet know a lot more (as in the exact numbers) than the rest of us.
Gosh! Why don’t you just rename your site to techcrunch.google.com for crying out loud! Get that out of the way!
How weird you never talk about M$ stock which have been for over five years flatlined in $25
Hey entrepreneurs!
It is time for a TC competitor, I’ll drop this shitty blog for a really unbiased review of all startups around the world.
Lots of money to be made, ask Arrington, he knows a lot about payperpost.
@12
Launch one and I’ll check it out.
The truth is, half of this stuff is pure fluff.
Journalists are just writers; they aren’t experts in anything.
Hey Masseratti: There have to be at least 50 TechCrunch competitors out there already.
@14 just name one and I’ll be gone forever
@15
http://www.startup-review.com/
One article from there is equal to 300 TechCrunch articles.
But it is seldom updated. A shame.
Google just launched openSocial based applications in Orkut today. There was no formal announcement it seems, you wake up this morning only to find them in your orkut home page. There’s iPoke, iLike and Flixter apps similar to facebook and some India specific stuff from Minglebox. There are also a couple of them from Google employees.
I’d steer clear of Google stock. Seems like they’re losin’ it.
I am still long but think Google is at a turning point. They have definitely upset a lot of webmasters I know when they changed their clickable area. I am sure this has and is going to have an impact on Goog’s bottom line. Moreover, Dheeraj mentioned there is going to eventually be a turning point of Noobs blindly pouring money into Adwords. Regardless, it will be interesting to see how it pans out tomorrow. Here is a show that explains the clickable area change: http://www.flix...e_ucash_animoto
Not sure many people realize how large a change this really is. Sounds small but the impact is HUGE!
AdGooroo just released their quarterly research report on Google and Yahoo. It clearly shows that Google’s quality algorithm cost them quite a few advertisers since July, but that they bounced back in Q1 (at Yahoo’s expense). This seems to support the idea that earnings will be up.
http://www.adgo...tiser_share.php
These guys normally know what they are talking about, so we will see…