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Friday, April 17, 2009
Reading Google's financial summary for Q1, it may be worth looking slightly more closely at what is still driving the company's growth, and what is finally accounting for a hint of weakness in the GOOG's overall profit picture. One thing that seems clear right off the top is that improved profitability has come as a direct result of responsible cost-cutting activities and decreased headcount, after a long run of breakneck growth.
All comparisons here are year-over-year for Q1 of 2009 vs. Q1 of 2008.
What's up?
The growing areas are as follows.
- International revenues. They make up 52% of Google's total revenues now, as compared with 50% in Q1 of 2008.
- Total paid clicks. Up 17% year-over-year. This doesn't break out search vs. network.
- Google sites revenues overall. This is extremely tricky because it doesn't prove that Google Search revenues are up significantly. Other properties, including the money-losing YouTube, contribute to this year-over-year growth number. And more recently there is weakness here. There is growth year over year but a sequential decline from Q4 to Q1.
What's down?
- Click prices in the U.S. No specifics given, but doing the math, there is weakness in the auction and prices are no longer rising on many keywords.
- Network revenues. Partner revenues aren't growing even though total clicks may be growing slightly. This is down 3% year over year and sequentially from Q4 to Q1. There seems to be both a lack of growth in the network and weakness in click prices; more so the latter, perhaps. Given that there is more room for growth in the network than on the relatively finite Google-owned properties front, this is disappointing news for Google. It may be too early to start pointing to flaws in Google's network technology and its approach to partnerships here, especially given the potential for their integrated DoubleClick division to launch new initiatives. If we're still seeing no growth by Q1 of 2010 then it may be panic time, and Google's ad serving competitors may be emboldened to take further share from them.
- UK revenues. These are down year-over-year. It appears that Google has broken out this particular item because it's their second-strongest national market behind the U.S. It would be interesting to see financial numbers for other markets, but it's unlikely we'll see these anytime soon.
Despite massive continued profitability, Google's Q1 profits are proof, at least, that the company lives in a finite world. Until investments in new lines of business lead to growing standalone businesses, its financial fate rises and falls with the ups and downs of click prices and search behavior on Google-owned properties and network partners. The fast growth phase is drawing to a close, but certainly there is lots of room for continued innovation in the space. What's possibly most impressive is that Google has managed to grow search advertising to this point without alienating finicky users.Labels: goog
Posted by
Andrew Goodman
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D'oh!
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