Google’s Q1: How weak — and why?

Posted by Peter Kirwan on 17 April 2008 at 01:07
Tags: Google, Independent News & Media, Media

Google’s Q1 results will hit the wires this afternoon (Thursday). They will be watched even more keenly than usual.

In particular, we’ll be interested in the company’s UK performance. The UK is Google’s most advanced outpost outside North America.

During 2007, the company grew its UK revenues by 58%, well ahead of the overall growth rate for online advertising (which the IAB estimates at 38%).

The law of big(ish) numbers says that a repeat performance is unlikely during Q108. By way of background, here are some numbers that need to be beaten:

Google: Reported UK revenues:

• Q4 2007: $692m
• Q3 2007: $661m
• Q2 2007: $600m
• Q1 2007: $578m

In the US, Google suffered another ugly month during March. According to Comscore, the number of clicks on the company’s paid search ads in the US rose by just 2.7% last month.

This caps a unpleasant quarter, during which Google’s clickthroughs — according to Comscore — rose by just 1.8%. For comparison, growth was 25% in Q407 and 48% in Q3.

Google isn’t saying much publicly about the Comscore numbers, which have provoked a vast amount of speculation during the past eight weeks. (Some of which you can read here and here.)

The big question is whether the slow growth in clickthroughs will be mirrored by weak revenue growth.

The optimists doubt it. Behind the scenes, they say, Google has been tweaking the way it serves paid search ads. This will result in much higher revenue growth than Comscore’s traffic numbers suggest.

The pessimists say it’s possible that Google will soon have to settle for growth rates below 30% — and less in rapidly-maturing markets like the US and the UK.

Behind all of this lies a fascinating debate about Google’s relative vulnerability to economic hard times.

Do consumers click on paid search ads more or less frequently during a recession? We’re about to find out.

For Big Media, the prospect of a weakened Google is fascinating. Weaker companies typically become more reliant on the goodwill of partners, less able to dictate from a position of strength.

For some, including Gavin O’Reilly of Independent News & Media, who continues to push ACAP, a weakened Google might feel like good news.

But if Google’s paid search business really is starting to reach a plateau, this will only lead to the company redoubling its efforts to generate ad revenues elsewhere.

So far, we’ve only seen hints of what Google has got planned for Doubleclick, the banner ad-serving platform it formally acquired in late March.

Alternatively, Google might decide that it is time to give the online classified market — up by 54% in the UK last year — a run for its money. More aggressively, there’s always the option of really going after the TV industry’s ad revenues.

Elsewhere, Google’s oddly threadbare mobile ad platform could do with a bit of updating, too.

One thing’s for certain: despite its efforts to compete with Apple and Microsoft as a producer of software, Google will never forget the ad business. It’s where the money is.

So keep being worried, Mr O’Reilly. Even if the investors desert the company in droves this afternoon, there’s plenty of life left in the Googleplex.

Supping with the devil: Google, Yahoo & newspapers

Posted by Peter Kirwan on 27 November 2007 at 11:09
Tags: Google, Yahoo

Farhi’s excellent article contains some information on the US newspaper industry’s continuing dalliance with Google and Yahoo. That dalliance takes the form of three joint ventures. For the most part, they’ve been heavily under-reported. Here are the agreements as Farhi sees them:

Yahoo has struck up a partnership with 19 newspaper companies that own 264 daily papers. Here’s how Farhi describes the mechanics of a deal which apparently results in the newspapers “taking a majority of each dollar generated”:

When an advertiser seeking to hire, say, a nurse, in St. Louis buys an ad through the St. Louis Post-Dispatch, the newspaper places the ad on its site, which is co-branded with HotJobs and automatically linked to HotJobs’ national listings. As a result, the advertiser gets his message in front of both local job candidates and others across the country. HotJobs, in turn, gets a local sales agent – the Post-Dispatch – to sell more listings.

An extension of the above project based around behavourial targeting. Here’s how Farhi describes it:

Using Yahoo!’s search capabilities and technology, the companies hope to marry national and local display ads to their visitors’ interests. People interested in, say, pickup trucks (as identified by tracking software and registration questionnaires), would likely see national ads for Ford, and perhaps for local Ford dealers, when they logged on to a newspaper’s site.

As he points out, CPMs for behavioural ads are a lot better than for untargeted banners. (Always assuming, of course, that newspapers can deploy the required technology without alienated their readers on privacy grounds.) Exactly how much better? According to Paul Ginocchio of Deutsche Bank, some members of the Yahoo consortium could see online ad growth rates of 40% for the next two years. . .

Google has moved on from its not-entirely-successful experiments in selling print ads on behalf of publishers. The search giant is currently running an experimental ad exchange (or trading system) that allows 225 newspaper sites to sell ad space on an auction basis.

Under an experimental program that was expanded this summer, Google is running auctions that enable thousands of smaller advertisers to bid on ad space – size, section and date of their choosing – on some 225 newspaper Web sites. The newspapers are free to accept the offer, reject it or make a counteroffer (Google says more than half the bids have been accepted). The process is streamlined by Google’s technology, which automates billing and payments.

More candidates for top job at GCap

Posted by Peter Kirwan on 27 November 2007 at 10:56
Tags: BSkyB, GCAP PLC, Google, United Business Media, emap

At the Guardian, Caitlin Fitzsimmons and John Plunkett have been chatting to headhunters. They’ve come up with a few more candidates for the vacant chief executive’s role at GCap. All are very long shots.

Malcolm Wall, chief executive of Virgin Media’s content division, is one of them. Perhaps this isn’t so surprising, since Virgin Media now seems more interested in super-fast broadband provision than competing head-on with BSkyB.

But Wall looks increasingly like an almost-man. He almost succeeded Clive Hollick at United Business Media. He almost became chief executive of ITV. And he almost got the top job at EMAP when that still meant something. Too many almosts, we think.

Then there’s Shaun Gregory, the former EMAP radio exec who is now UK chief executive of pan-European free mobile operator Blyk (a long shot, given that Blyk only launched a few months ago).

They’re also suggesting Mark Howe, the country sales director at Google UK. (He’d have to be insane, right?)