Do the Numbers Click?
By AZAM on March 3, 2008Recent reporting from ComScore on Google click on Ads had mentioned a slowdown. Result, Google share are down from flying high in the sky like a 747 reaching high altitude before hitting turbulence and dropping to the mid 400 range. The report resulted in a number of analysts and pundits to reassess their position on the stock and online advertising industry. As the economy seems to stall from growth and possibility of recession in horizon, a number of analyst feel the current environment may have an impact on the online advertising that Google dominates in search advertising. The online advertising market is expected to grow from current levels of 40B in 2007 to 80B by 2010. The questions that arise are if the online advertising market will continue to grow at current rates and if Google can retain its dominate position.
Last Tues, Comscore reported
ComScore, the research company, reported clicks on Google advertisements in the US last month were down 0.3 per cent year-on-year at 532m. The numbers are compared with 13 per cent growth in December and 27 per cent growth in November.
The Move down
Recently, Google announced revenues in Q4 growth of 52% compared to analyst projections of 55%. From more recent news , ComScore figures caused the stock to move down 4.6%. The stock was down around 20% in a month and 40% from high of $747 last Nov. Analyst have move down their target for the stock as well. UBS cut its price target for Google from $650 to $590. The Blog Pundit and former street analyst Henry Bloget of Silicon Alley Insider characterized the ComScore report “shockingly bad” and a disaster for Google.
Henry Blodget
This report is so shocking it bears repeating: ComScore said Google’s US revenue units (paid clicks) grew 25% last quarter–a quarter that disappointed Wall Street. In January, the same source, ComScore, says the same revenue units were flat.
What could be the explanation for this? Strapped shoppers not clicking on as many links. This is exactly why one insider argued last week that Google is very exposed to economic weakness–and why we have been concerned for six months that Google was not “immune” to a recession.
Well Not So Bad
From Magid Abraham and James Lamberti of ComScore
Earlier this week, comScore released its January 2008 qSearch paid click report, which showed a 7% sequential decline vs. December ‘07, and a flat annual growth in paid clicks for Google. Moreover, the number of paid clicks per Google search query declined by 8% from December to January, suggesting that consumers are clicking less on search ads, possibly reflecting a weaker buying appetite. The information triggered a flurry of reactions in the media and the financial community that centered on two concerns: 1) a potentially weak first quarter outlook for Google, and 2) an indication that a soft U.S. economy is beginning to drag down the online advertising market.
The authors go further and attribute the discrepancy in numbers on Google efforts to primarily of Google’s own quality initiatives that result in a reduction in the number of paid listings and, therefore, the opportunity for paid clicks to occur.
Also mentions
Separately, there is no evidence of a slowdown in consumers clicking on paid search ads for rest of the US search market, which comprises 40% of all searches.
Another View
Robert Peck of Bear Sterns mentioned the importance of viewing a number of data points to get a clearer picture of the online advertising. Robert Peck talked to Roger Barnette the founder/President SearchIgnite to get some insights on online advertising and SEM. SearchIgnite has seen substantial growth in paid clicks from the start of year to mid Feb, and Ad spending is up and improving as well. SearchIgnite has been accurate data points in the past with data showing Yahoo reversal in 3Q07 and Google underperformance in 4Q07.
The Bottom Line For Now: It’s all Good !
The online search and advertising market is still growing and the impact of the economic weakness has not been seen from industry. Eric Schmidt mention early mentioned Google has not been impacted by economic slowdown or softening of the economy. The number attributed by ComScore is more than likely due to Google efforts to cleanup paid advertising and reduction of number of Ads in paid advertising to increase quality. Google will likely see improvements in quality of advertising effectiveness and increase in ad revenues as result of efforts. The amount of search traffic from Google is increasing and the growth in the amount of search engine marketing spend is still robust based on traffic numbers and search engine marketing spending numbers.
Tags : advertising, Google