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Thursday, July 17, 2008
A couple of major announcements have come down the pike from Google on the product side. We'll get to those shortly.
But first, the earnings. Google shares (GOOG) are down about 8% in after-hours trading based on them missing Wall Street estimates, whatever that means. By all accounts they continue to rake it in in remarkably robust fashion across all sectors.
Absolutely, this thing will slow sharply soon. It has to. If Google winds up the year with $21 billion or so in revenues, it's hard to see how any company like Google could get much past $50 billion in revenues from advertising, ever. They can't keep growing at 50% a year forever unless they start invading nations and colonizing other galaxies (which, I understand, they're working on). Google has shown no propensity to make money in other lines of business, either. They are good at creating massive value to funnel users back into the same economic engine. When they eventually move into revenue-generating new fields like telecommunications, they can keep growth moving that way - but again, the profit margins and overall financial outcome is bound to "disappoint Wall Street."
The final growth slower for Google is the people equation. To continue growing at a breakneck pace without slackening their headcount increases is near impossible: they'd have to start hiring dumb people. They're sort of averse to that.
For now, even Google economist Hal Varian's confident statement that Google is benefiting from a "Wal-Mart effect" in that this highly targeted advertising is the "last thing" companies want to cut in this weak economy, is tilted a bit conservatively. The reality is that many brands with big kitties of cash remain skittish, and have barely migrated any of their wasteful offline spends to online channels. The migration is ongoing. As such, Google will get to that $50 billion top-line number before you know it. That's going to be disappointing only if your "estimate" says $53 billion.Labels: goog
Posted by
Andrew Goodman
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D'oh!
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