Google, whose stock is down 45% this year, announces third quarter financial results tomorrow, and Silicon Valley will be watching. Analysts expect revenues of a little over $4 billion and EPS of $4.79 – and most have price targets for the stock, which closed yesterday at $363, to bounce back up to the high 500’s.
For now, the big factors affecting Google are the strengthening dollar (half their revenue is outside the U.S.) and general pessimism about the advertising market moving forward. There are also concerns about the intense regulatory scrutiny of the Google/Yahoo search deal.
Beyond this quarter, though, no one really has any idea how Google will do, and that uncertainty is what’s driving Google’s stock down. A declining stock market means less consumer spending, which then means less advertising dollars flowing as well. But what isn’t certain is how that will impact Internet advertising, which is still taking share from more traditional ad spending.
Citi analyst Mark Mahaney, who’s targeting Google stock at $590, thinks Google is in a good position to weather a storm: “GOOG is the market share leader – and is gaining share – in arguably the most dynamic part of Internet advertising – search, which appears to be less impacted by the current macro economic environment,” he said in a recent preview report for the fiscal quarter. He also sees strong growth potential for non-search ads through YouTube and DoubleClick. ComScore is reporting that the growth in the number of searches on Google accelerated in September.
Google’s financial health is a key driving factor in the Silicon Valley ecosystem – if they’re strong and keep buying companies, venture capitalists will keep funding new and existing startups. If Google and others slow acquisition activity, venture dollars will dry up too. So keep hoping people all over the world continue to click on those search ads – your startup may depend on it.
“Google who’s stock” Google who is stock doesn’t make sense. Oh right, you mean WHOSE.
grammar police.
That’s often a fair call out, John, but I believe Michael has made it quite strongly clear in the past that he values grammar and clarity very highly in his writers. (Of course, it’s totally fine to have double standards, but can’t blame “bla” for calling it out
)
Anyway, we all make mistakes. Evun me.
Grammer should not be an issue in blogging. An apostraphe error here or using a word on the wrong context. For all I care, you don’t even need to spell correctly. Just get me the correct facts. This isn’t the WSJ, its a glorifed blog.
I generally appreciate when comments point out these issues as long as it’s done in a polite way.
Sorry but when are all eyes not on Google? They are market leaders and are always under the microscope.
This is 100% accurate
they miss their numbers and the party is over for the Internet bubble this go-around. it’ll be time to begin thinking about Web 3.0:)
for all i care google can burn. My issue with them is they have lost the fact that the little guy helped them gain their standing in the market and now they move on to be big brother and have all but forgotten that its us that makes them rich. So if they keep dropping in price it will bring them back down to earth and they can “remember” what it was like to to be small again – just my two cents -
I agree. If it wasn’t for Adsense they would be a distant memory like AltaVista, WebCrawler, etc. Maybe Adwords is their cash cow now but how long will that last? It won’t, search is trivial, basically a brute-force job, their hardware edge is very impressive now but fleeting. 99% of search is exact match, the AI claims are bogus. Finding stuff gets easier every day, which is why they cut off DMOZ, intermediaries, publishing more content. But instead of investing in Adsense they waste time taking pictures of space, working on DNArank, submersible datacenters. Adsense is their lifeline, they just don’t know it yet, which is why these ad units are still unbelievably boring after all these years.
RE: “keep hoping people all over the world continue to click on those search ads:
That comment brings out something that I’ve been wondering about for a long time, and that is:
What if people who had an interest in Google revenue, earnings, and stock price rising thought the same thing, and actually acted on it? A click here, a click there. It adds up. I mean I do dozens of searches per day and see hundreds of ads per day, some of them interesting, especially when I’m shopping, but I don’t usually click on them. What usually happens is the ad just reminds me to visit that particular retailer, which I do in a new tab Ctrl-T so I can do my comparison shopping. But what if I decided to click on the links instead? It’s legitimate, helps me with my shopping, and helps Google (in the short term… as conversion rates drop, advertisers bid less, which hurts Google, of course). At the margin, there must be some skew in the + direction from this. I dunno. I wonder how much extra clicking happens due to the “hope” you mentioned. I’m sure most everybody will say its negligible or totally non-existent. Who knows. Nobody right now. Who doesn’t want you to ask? Google, maybe?
some say click fraud is around 30%. i bet in a recession that number goes much higher. reminds me of a newspaper rack that only charges if the door opens not how much paper you take. no one takes them all because they are worthless. Would people only take one news paper if they were worth 50 cents to a dollar. I dont think cpc breeds efficiency which is the natural evolution of the net. cpc appears doomed to fail. In the future as efficiency runs rampant the internet will be shrinking and G wont be able to cope.
KillerLocator.com- some like it cold.
The fact that half their revenue is outside the US should help. Less advanced countries are only now discovering online advertising. Thus, online ad spend in those countries is only now on the rise.
What bothers me is that Google is still relying too much on it’s Adwords Program to drive the max revenue to them, even after 10 years in the valley, the company is yet to come up with the next big revenue generation tool for them, we all know they are yet to come to proper strategy in order to monetise from YouTube & DoubleClick, & even the much publicised Android for Cell Phones is not ringing the cash registers at Google,
Isnt it a High time that Larry Eric & Sergey come up with another money making tool apart from Adwords which in my opinion can fizzle out if the next Startup at the Valley can make a hot shot better product than Adwords.
What do you all think??
hahaa, no one can make a better product than adwords. They control the search market, people will continue to use it simply because of market share.
They used to say the same thing about Windows.
And windows is still the company with the most marketshare.. Thank you for helping me make my point.
It will be interesting to see how many advertising exchanges pop up and how many existing ones start to thrive.
People are expecting it to jump back to high 500’s? Really?
I don’t know if Google is that much of a deal. OK, Google has the money, but Silicon Valley has other big buyers. And I think high 500 is fantasy.
perhaps they’ll discuss what they plan to do with all of their idle cash given current options for generating returns…
During a keynote presentation on broadband video at Mipcom today, YouTube Founder and CEO Chad Hurley confirmed that he has struck a deal with CBS to feature their long-form content. Under the deal CBS will sell their own advertising and YouTube will take a cut. Google losing grip or a bold strategic move?
I think that has more to do with figuring out how to crack the online video profitability nut than it does Google losing grip…
maybe. Certainly YouTube needs to ‘legitimise’ and start to build a sustainable revenue. But to allow CBS to place their own ads must stick in the throat of Google.
I don’t see how Google can get back to high $500’s any time soon. The fact that the entire sector is flat at best doesn’t help and frankly consumer confidence is down more now then ever. It will be at least 4th QT 09 before anything looks like it did last year at this time.
Google will definitely weather the storm, but that doesn’t mean their stock will sustain a price in the high 500s any time soon. The current price largely reflects expectations about today’s and future earnings. My best guess is that it will be fairly stagnant for 12-18 months.
down 45%, hiring freeze for over an year. Dose not look good. MS should acquire Google
So Microsoft acquiring Yahoo, would be bad for the industry huh?
It would be dangerous .If there is no competition, all the low cost models will be gone ,there will be paid services. The end user is the victim.
Yahoo will acquire microsoft and destroy it.
Google has no long term sustainable business model. But then again, neither does any other large web services company.
I feel ,soon myspace or facebook people are the one’s who can make it giving a jerk to the google’s they have a huge user base (who are internet savvy) and if they make a regular mail , easy to use search engines , sure shot they can intrude the google’s market space. Then google comes and acquires any of the two
. So far in future huh!!
Google will last till the end of time I think., even if their stock goes down, or they get hurt, they will still weather the storm. The company is too big, and has spread its branches all over the world, it ill take a strong hurricane to knock them down.
http://gatesand...s.blogspot.com/
So did Lehman Brothers.
“general pessimism about the advertising market moving forward. ”
This concern is overblown. I work for a competiter – search dollars are not being impacted negatively at all. OTOH, we are seeing CPC inflation which is good for revenues.
“There are also concerns about the intense regulatory scrutiny of the Google/Yahoo search deal.”
This has no impact on Goog’s finances. I would be hard pressed to believe that Goog would structure the Yahoo deal for revenue generation. Its more of a strategic play and Goog is happy to let Yahoo keep the bulk of rev share.
“Citi analyst Mark Mahaney, who’s targeting Google stock at $590, thinks Google is in a good position to weather a storm: “GOOG is the market share leader – and is gaining share – in arguably the most dynamic part of Internet advertising – search, which appears to be less impacted by the current macro economic environment,” he said in a recent preview report for the fiscal quarter. He also sees strong growth potential for non-search ads through YouTube and DoubleClick. ComScore is reporting that the growth in the number of searches on Google accelerated in September.”
This is precisely the reason Analysts will generate more value by working at Burger King.
“GOOG is the market share leader – and is gaining share – in arguably the most dynamic part of Internet advertising – search, which appears to be less impacted by the current macro economic environment,”
Only the last part – search being most dynamic is correct. Goog is obviously the market leader (don’t need an analyst to tell you that) but its growth rate is decreasing. So whereas it makes a truck load of money, the growth potential is being limited.
“He also sees strong growth potential for non-search ads through YouTube and DoubleClick. ”
I wonder if Citi is giving the same benefit of Growth Potential to Yahoo and AOL? After all, if you exclude the halo effect of goog’s performance in Search from graphical media and video, what exactly is the potential of monetization for these tactics? Google is where it is because the monetization of Search on CPC is much greater than any other type of performance media. There is no way that dollars will flow to Graphical and Video in the same way they did to search, simply because the user intent to transact (the key to success of commercial search queries) is lacking.
I think a lot more than just the silicon valley has their eyes on what will happen to google tomorrow. I know a lot of people have been wondering how hard tech will be hit by the financial troubles and about a month ago people would have said tech is fine, but in the past week seems like that has started to change. Tomorrow will be a big indicator of how hard tech has and will continue to be hurt.
Peter Epstein
http://www.thewebwar.com
You think NASA will revoke special landing rights for the Google Party Plane? Or the cafe workers there will unionize? Or the intern party bus will get a flat tire? Or the carbon killing, redundant Google shuttles will explode?
Probably not.
But MSFT is kicking some a**. While the Googs are crying in their Organic Milk and Odwalla Shakes (over a platter of truffles)…the world has moved on.
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Google has been an absolutely AWFUL public company over the last 24 months. They may want to go private because they are a terrible investment vehicle going forward. Wait until the recession hits their numbers — ouch!
good analysis but flawed as it takes the wrong approach. G1 is for techies developed by techies, iPhone is a lifestyle fashion accesoire. you can’t compare apples with oranges.
haha, guys started pointing out grammatical errors instead of looking into real thing …
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