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Thursday, April 17, 2008

Google Earnings (GOOG) Downside

Google earnings (GOOG) beat estimates (via Silicon Alley Insider):
Gross revenue exactly in line with consensus--$5.2 billion, up 42%. Net revenue $3.7 billion, slightly ahead of consensus. Non-GAAP EPS of $4.84 blew away consensus of $4.52.
Before the closing bell, I had guessed net revenue of $3.74 billion and EPS of $4.92. A little high but not too far off. If you're in the search marketing business, you had to know GOOG was doing just fine. I think there's a downside, though, to future revenues. Here's the comment I left on the Silicon Alley Insider post, Google (GOOG) Q1 Game: Step Right Up and Place Your Bets:

* Net Revenue: $3.74 billion
* EPS: $4.92
* Friday Open: $489

Google makes quite a bit of money from a hidden network. It's neither search advertising nor contextual advertising. Google has only recently created an opt-out mechanism for this hidden network:

Note that a former SVP of SEM firm Efficient Frontier called this kind of traffic "distribution fraud" - it's not quite the same as click fraud. Google that. ;-)

Now, how much revenue will Google lose in future quarters as advertisers start opting out?
Hmm, seeing the $76 surge in GOOG after hours to $525, perhaps the intrinsic value of $1195 calculated by my client, Analytical Investing, is plausible:

GOOG stock analysis

That's still far below the $2000 GOOG target by Henry Blodget. Depending on the time horizon, I don't think that's unreasonable. However, I do wonder if there is some downside risk to GOOG over the next few quarters as they lose AdSense for Domains revenue (much of which they should never have had in the first place, IMHO). I suspect this is why Google hasn't made a public announcement about their new AdSense for Domains opt out. I haven't seen it on either the main Google blog, Inside AdWords or the AdWords Agency blog. Nor have I seen a press release about it. Hmm, does Google not want advertisers to know about it? ;-)

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Anonymous Anonymous said...

richard, i have started a service where i can get you a daily list of all the domains running in the domain park program. would you be interested in seeing it. it may help you block the domains for your clients. let me know here. if you are, i can send you my email.

Fri Apr 18, 08:14:00 AM EDT  
Blogger Richard said...

I'd be interested in finding out how you're generating a "daily list of all the domains running" in AdSense for Domains. Even Google doesn't seem to know how to do this. ;-)

Your service wouldn't do me any good, however. For most of my clients, I focus on search advertising. Since you cannot block individual parked domains on the search network, I've resorted to blocking all parked domain traffic.

I realize I'm losing some good traffic. The potential for domain advertising to be better than search advertising exists. The traffic being routed through AdWords via the AdSense for Domains program doesn't live up to that promise. There's too much garbage and it's not worth the risk to allow it any of my clients' accounts.

Sat Apr 19, 10:59:00 AM EDT  

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