Google & Yahoo Financial Earnings Expert Rundown
This was a big week for Yahoo and Google, as both announced some intense earning numbers this quarter. Google blew most analysts away with revenues coming in at a record $1.578 billion, representing a 96% increase over third quarter 2004 revenues of $806 million, and a 14% increase over second quarter 2005 revenues of $1.384 billion. The earnings amounts even shocked one of the top Googlers. “We surprised ourselves this quarter,” Google CEO Eric Schmidt said during a Thursday interview. “Business was much stronger than I expected.”
Yahoo also showed some incredible financial earnings, posting a 47 percent increase in revenues at $1.33 billion. Yahoo said net revenue for the quarter ending September, excluding traffic acquisition costs was up 42 percent at $932 Million, and that’s without an advertising network like Google’s AdSense – as the Y! Publisher Network is still in beta testing.
Instead of just passing along some more numbers and quotes from Wall Street tycoon analysts who were stunned like deer in the headlights over the numbers which “exceeded expectations” (echo), we thought it would be much better to hear the reaction by the search engine experts themselves, the search engine bloggers. Here’s a rundown from some of the Google and Yahoo earnings reviews of the Searchosphere.
Andrew Goodman of Traffick on Google : What they’ve done is realize the full extent of that earnings potential quickly, meaning, in essence, that the company’s performance will allow it to “grow into” its stock price more quickly than expected.
So for now, exceeding expectations is still within the realm of the expected, since we’re still talking about advertising revenues. Nonetheless, many continue to underestimate the company, not even factoring in future projects.
Got Ads? on Yahoo Earnings and so-called Wall Street Analysts :
THESE are the salad days for internet advertising. I’ve met a good number of Wall St analysts, and I sometimes wonder how they are able to generate random quotes as easily as they do. At the end of this Investor’s Business Daily earnings coverage article, Citigroup internet analyst Mark Mahaney makes some random comments about Yahoo needing to upgrade it’s search functionality.
Even as its revenue soars, Yahoo faces hurdles, analysts say.
For one, it needs to improve its search engine to better compete with Google.
That could take time, says Mark Mahaney, an analyst at Citigroup.
“They really need to fix the search engine, and that seems like that’s a March quarter event,” he said.
One analyst says “they really need to fix the search engine”. And he’s guessing how long that will take! Of course, it’s not clear at all where he’s coming from. I used Yahoo to look up a lot of Mahahey’s past comments and can’t find anything about Yahoo being that much behind in search technology. Then I tried Google and got even less.
How would he determine that Yahoo’s search is so obviously behind? Would Yahoo tell him that – and give him the time frame. I seriously doubt it. This is why I wonder how much the Wall St. analyst guys just make this stuff up RIGHT WHEN the press calls for the quote.
Stanley Wong of BetterPPC from ThreadWatch on Google : I was curious about how Google managed to do all of this, and as a result I set forth to dig into the earnings to figure out where all this growth is coming from. In my research I started listening to part of the Google earnings call yesterday, where Eric Schmidt, CEO of Google, attributed much of the earnings blowout due to “Product Improvements”. Hold on here… What does “Product Improvements” really mean?
I would have to guess a lot of it has to do with the release, this past quarter, of their new Google AdWords quality and relevancy ranking algorithms. This new algorithm monitors the quality of your keyword/advertising copy combinations and if it doesn’t meet a certain “quality ranking” Google will disable your advertisement unless you either pay more or inprove your ad. In short, the new algorithm has made, for advertisers, the Google AdWords blackbox a lot less transparent.
Day to day, I speak with a lot of Google AdWords advertisers in my line of work and there is a lot of confusion by advertisers about the new “quality ranking” algorithms. The confusion is so pervasive that most advertiser find a quick fix for an advertisement disabled by the “quality ranking” algorithm is to raise their bid amount. Raising the bid amount means a higher cost per click for Google which means higher margins for the company! Essentially the result is the new Google AdWords is tuned to maximize their revenues since most people don’t bother or have the tools to do proper testing of their online advertising copy.
Wow… Has Google built a fabulous mechanism that they can adjust at any time to blow out future earnings expectations? It really brings into question about the premise of “Do No Evil”…
More Yahoo insight from Andrew Goodman on how Yahoo Search Revenues Get No Respect : The thing that really amazed me, though, was when the host asked “what do you think is more important to Yahoo, and which do you think is more important… the banners, or the, if you will, companies that pay to be seen in the search results, over to the right hand side of the page, if you will?”
The answer was banners.
Why? Perhaps (indirectly) because top management at Yahoo (not those in the Overture division, clearly) believe the company’s future lies in the whole media package. Perhaps so. Perhaps also because the stock market is likely to reward a company with a big fuzzy upside, and Yahoo can’t create the perception of big fuzzy upsides solely through search (at least not in North America, where it’s harder to induce investors to lap up the Kool-Aid of trends like mobile search).
How true Andrew, how true. Just run a search over Google News or Feedster to find out which company is the darling of the media and financial analysts. Google always gets top play over Yahoo in the media, since Google is a company based upon search and Yahoo is a net media company using search. Acknowledge that Google considers contextual advertising (which includes behavioral targeting), desktop software and user tracking to be search and we’ve now broken the perception.
No malintent for AdWords, but let us also remember that Yahoo’s Overture (Y!SM / Goto) was the first paid search advertising model on the market, and for a lot of business to consumer advertisers, the more profitable one.
Do a search for “Yahoo Earnings” on Google News and you’ll see that 98 articles are indexed with titles ranging from “Yahoo earnings beat forecasts” to “Yahoo! earnings don’t excite”.
Try the same search for “Google Earnings” and you’ll see 116 stories with a bit of a different feel to the headlines : “Google’s earnings soar”, “Google hits all-time high”, and “Google Earnings Show Search Business is Stronger Than Ever.” Not a whole lot more coverage than Yahoo, but much more positive.
Now let’s go beyond Google News and into the blogosphere with Feedster, try a search for “Google Earnings” on news, blogs, and feeds via Feedster and you’ll see 4,401 results. That’s alot of coverage.
Then try the same search on Feedster for “Yahoo Earnings“, 149 results. Yahoo has some work to do with the buzzworthyness of its earnings. A lot of this has to do with shelf life on the buzz market. Yahoo earnings have been posted for years, while Google is still fresh and new on the stock market. Yahoo is a stable stock, rising slowly over time. Google is still unstable with the ability to jump $30 after an earnings report, or dive the same amount on a bad stock day.
Either or, the state of the search marketing industry is strong. And with more expected earnings reports from Ask, Looksmart and others, we should see a continued positive flow this fall.