Google: 'We are Meltdown proof'
Economy sagging? Crank the money machine
Defying a melting economy, Google racked up $5.54bn in revenues during Q3, a 31 per cent leap from a year ago. But that's hardly a surprise. This summer, during a conference call announcing ho-hum Q2 earnings, co-founder Sergey Brin left little doubt that the online ad broker would soon crank the dial on its top secret money machine.
Of course, when delivering earnings to reporters and analysts on today's Q3 call, Google preferred to label recent changes to its ad platform as "quality improvements." But the bottom line is that in Q3, these changes unleashed more ads onto its search pages. "The quality-based bidding launch...increased our coverage significantly," Sergey said today.
More ad coverage means more revenue - whether the ads match what the surfer is looking for or not. Google gets paid when surfers click on ads, not when "high quality" ads actually generate useful leads. And if you serve up more links - even misleading links - you get more clicks.
In the quarter ending September 30, Google hit $1.35bn in profits, a 26 per cent increase from the same quarter last year. That's $4.24 per share, and if you exclude costs for employee stock compensation, earnings per share hit $4.92, a good 17 cents higher than the estimates of Wall Street guessmen.
Three months ago, when an analyst asked Google senior vice president Jonathan Rosenberg why ad coverage was shrinking, he said it was down to the company's "focus on quality," indicating the shrinkage would continue. "[Google co-founder] Larry [Page] says we'd be better off showing just one ad [per page] - the perfect ad," he said.
But he was quickly contradicted by the other co-founder. "There is some evidence that we've been a little bit more aggressive in decreasing coverage than we ought to have been," Sergey Brin said. "We've been re-examining some of that."
Then, in early September, Google rolled out significant changes to its Adwords setup. Among other things, the company did away with the infamous minimum bid that often prevented advertisers from joining "auctions" for certain search keywords.
AdWords now calculates each ad's "quality score" in realtime. Brin and crew say this leads to better ad placements. But even the experts have no way of judging how well or how poorly this works. And we all know that Google search pages are littered with irrelevant ads. Even if AdWords is indeed serving up more high quality ads, odds are it's serving up more low-quality ads too.
Online ad matching is not an exact science.
What's clear is that the changes had an immediate impact on Google's revenues. "As far as the quality announcements [rolled out in early September], it was one of the bigger things we did in the quarter, and these things tend to manifest themselves in terms of their impact reasonably expeditiously after they're launched," Jonathan "Perfect Ad" Rosenberg said today. "Most of the benefits of the typical quality enhancements occur very, very quickly."
You heard it here first. Commanding close to 70 per cent of the search market, Google has a ridiculous amount of control over how much money spills in from advertisers. With a few tweaks to the platform, it can serve up more ads whenever it likes. And even if those tweaks hurt advertisers in the short term, they have little choice but to stick it out. Google's competitors just don't have the reach.
And that means Mountain View is all but recession proof. Of course, chief executive Eric Schmidt prefers to spin things a little differently. "We believe that [Google's Q3 results] reflect the fact as marketing budgets are squeezed, targeted ads are becoming more valuable to advertisers," he said today. "And as consumer budgets are squeezed, people use the web for comparison shopping to hunt for bargains online and in stores." ®
I use Google to shop ...
but usually the content pages are better than the ads, although the ads for comparison shopping are also useful. Once in a while the ad is spot on and is the one I use.
The best shopping currently is on the Google Shopping format page, though, and the ads there are for all my favourite resources such as New Egg and comparison sites, while the main page allows you to see a particular drive at all different places, such as ZipZoomFly, one of my favourites for buying. I don't know if those are content or ad-based, but they are pretty good.
There used to be a different Google buying page that was really not any good, so I always used the main Google, ads, and comparison sites. This was when I did small-time commercial purchasing for my company. I saved us a lot of money!
I have always preferred Google as a search engine -- fast, no Flash, no pictures, no My-Your-Recommended-Latest bull. No Portal! Just speed-readable text.
When folks call tech support, the diagnostic for network connection is: try a Google! Nuff said.
@By Anton Ivanov
Bad tactic. Simply clicking ads to see what is being charged for various goods or services is worthless. All you'll get is continuous corporate hype and rhetoric designed to maximize their profits, increase their market share, grow their company and increase their stockholder worth. If you need to obtain true competitive pricing, ads are the last place you should go. By design their sole purpose is to convince you to buy their product in deference to others.
If you seek competitive pricing, feature evaluations, and etc, you can do actual product research as provided by a number of legitimate product testing labs that do have a web presence. Some do charge a small membership fee but the cost is well worth the value received. At the very least, read user reviews and evaluate on that basis. But deciding to spend your money by heeding commercial ads is analogous to just marrying the woman (or man) who screams "I love you" the loudest. Not the best basis for a happy relationship unless all you want is a big mouth mate. Not me, I'll do the research and get other big assets too.