One thing that will also cloud comparability in Q4 and FY 2008 for advertising is the election cycle that won't have the same cadence into 2009. That said, I have no idea what kind of % of advertising happened in politics v. retail and would like to see comScore dig that out if they could as it would be a very good indicator of 2009's base.
mikepk
· 11 months ago
I'm curious how obfuscated Google's results will be. The fact they increased their adwords per search page (by something like >50%) means to me they could actually make their numbers but on much more aggressive ad placement.
fredwilson
· 11 months ago
Hmm. That¹s a good point. It¹s very hard to get inside the google machine and figure it out
jordanmitchell
· 11 months ago
That is a good point. Google has a lot of levers in the back end they can probably use to make earnings look like they want them to look, such as: -- ads per page -- whether they show ads on search pages (many times they choose not to) -- revenue share ("smart pricing") -- bid rate accepted
For years SEM demand exceeded supply, which led to inflated CPC rates. While their content network continues to grow, I would imagine Google's search inventory is much flatter. If SEM demand is softening, and CPC rates declining, can they make up for it by opening more supply, or does that make CPC rates decline further?
EricFriedman
· 11 months ago
They have also added adwords to image results pages and a few other product areas which further push up volume. We need a foundation by which to benchmark the numbers against, which may not happen until they slow the process of adding ads to all new and old properties.
Kevin Stecko
· 11 months ago
I think long term google has some issues to deal with even if advertising budgets shift to paid search. My company is an online retailer and google benefits when we advertise in traditional media (for us that is mainly print magazine ads). Say we run an ad in Entertainment Weekly and advertise 10 different t-shirts. Many people don't know the difference between a google search and the url bar so lots of people go to google and type in 80stees or 80stees.com. This gives google an opportunity to sell ads to my competitors (and I'm forced to bid to try to keep my competitors out of the top paid spot).
There are also people who won't search for my company but instead will search for the t-shirt they saw. This multiplies the opportunity for google to benefit from our traditional advertising. So if thousands of companies drop their traditional ads in favor of search google may benefit in the short term, but I think in the long term it hurts them. The death of newspapers and magazines will have a similar effect on google.
Search may be super efficient but searches usually are created by some sort of stimuli that occurs in our life. So as more people shift to search marketing from traditional media the overall stimuli will decrease, which will lead to less searches. Less searches can only lead to less revenue.
BmoreWire
· 11 months ago
I would love to agree with you but the truth is consumer need will never subside. Your argument is kind of flawed. People don't buy clothing and food because they are advertised to, they buy it because they are cold and hungry and to say that people will grow less cold and less hungry is incorrect. Advertising just re-directs that consumer need. For example people don't buy cell phones because Sprint advertises. They buy cell phones because they want to communicate with eachother in a mobile fashion and their lives are simplified and made easier by this invention. Verizon, Sprint, and At&t then fight over this consumer need by differentiating product, placement, price, and promotion in order to partition that consumer need and create brand loyalty and brand favorability. But if all 4 of them stopped advertising tomorrow, people would still buy cell phones and search for cell phones because they know they exist and they make life easier and have become a consumer need.
Banner/offline advertisers don't like google and like to dream up reasons why it will fundamentally fail. But the truth is they connected all consumers with all advertisers and matched supply and demand in the most efficient and simple manner. You want something you type it and click 'search' and there it is! Now, you do in fact need Banner/Offline advertising and brand building to point that fire-hose in your direction but google won't go away, it will not decrease, and it will only decrease in revenue if there are less dollars in each transaction of that supply/demand interchange (i.e. reduction in RPM/RPC) Look at Yandex or Baidu. They are in communist or post communist environments where advertising is restricted or unnecessary and they still thrive. People still want stuff, people still need stuff and if they have an easy way to find it, they will do it. You may not like it or the rules that they have laid out but they will not go away or subside.
Kevin Stecko
· 11 months ago
Just to clarify I actually like google and don't predict their failure. But they do benefit from other advertising mediums.
I agree with your point wholeheartedly in mature markets and in consumer staples . But there are a lot of things that people don't need but may want, and advertising is a vehicle to create awareness. A person can not desire something if they do not know of it's existence. Along the same lines a person can not search for something that they don't know exists.
No one needs a Karate Kid t-shirt or a Ferris Bueller t-shirt (although as you point out they obviously need clothing). My point is that google benefits when our ads make people aware of Ferris Bueller and Karate Kid t-shirts because the awareness creates a search opportunity. Less awareness = less search opportunities = less revenue.
You pointed out "You want something you type it and click 'search' and there it is!". My point is that you have to want something first, and I've never searched for something I didn't already have an interest in.
fredwilson
· 11 months ago
yup
mydigitalself
· 11 months ago
Hang on a moment.
"People don't buy clothing and food because they are advertised to, they buy it because they are cold and hungry..."
I think you are way, way off the mark there. I just bought 3 T-shirts, I've got loads. I'm not cold. But the email that Threadless sent me appealed to me aesthetic tastes, and I spent money.
I do think people buy some stuff because of basic needs, but more than half the stuff we buy we don't need and it was likely to be an ad that put the thought in our brains in the first place.
andyswan
· 11 months ago
Demand down. Supply up. Price down, volume up. = Good Q4 numbers, bad 09 outlook.
RacerRick
· 11 months ago
I think one could make some $$ buying GOOG when Fred sells... and selling GOOG when Fred buys...
fredwilson
· 11 months ago
Maybe, but most recently I bought at $275 sold at $330, and am thinking of buying again when the numbers are out
marshal sandler
· 11 months ago
Google has a firm grasp on semantics general semantics and mathematics ! All these elements make you a winner in the numbers game ! People buy products because they are advertised other wise their would be no brand identity many people are sort of jealous because Google took free Available data that everyone new existed and used it to turn a profit! Part of my education was in statistics and belly to belly marketing many people who own businesses have no concept in marketing by the numbers ! Look at successful Public Relations firms like Edelman who create profit analyzing trends then applying the principles of semantics and general semantics! Google will always survive since the are not a copy of success but a model !
GordonJ
· 11 months ago
It seems to me that both studies point to the same conclusion -- growth is slowing, but there is still growth nonetheless. Slowing growth in the search ad market is to be expected given the current economic clime. But search is a pretty compelling ad spend. Especially when nearly everything else represents hard to measure ROI.
I am bullish on GOOG and bought in anticipation of a bump with the release of Thursday's numbers.
Scott Johnson
· 11 months ago
If you are a trader, expect a bumpy ride as the world sorts itself out. If you are an investor, today's sub 300 close is a great entry point for GOOG. Akin to buying msft in 1990.
gruvr music map
· 11 months ago
I think it's going to be a huge negative surprise. Bottom line is many ad-supported sites are way down on eCPM even on increased traffic. If eCPM from online ads is down for most sites, it has to be net down for GOOG despite increased spend from whomever.
Plus GOOG has shown many signs of panic/desperation:
a- aggressively contacting webmasters and asking them to implement more ads (eg adsense for search) b- running remant inventory (eg no-revenue ads for youTube and other goog properties) c- cost-cutting, layoffs, etc
Unfortunately their rev stream is not yet diversified to be immune to the worst part of web ads : their pyramid structure, as sites that sell ads often buy traffic with ads and the arb chain can swiftly collapse.
Since the cost cuts are in response to a change in market they will likely not show much effect yet on a trailing revenue report...
JMHO
fredwilson
· 11 months ago
We¹ll know in 15 mins
GordonJ
· 11 months ago
The numbers are out.
How sweet it is to be loved by GOOG.
The one (the only?) nice thing about this recession is that more ad dollars are going to move online and never look back. As we all know, the ROI is measurable online and at a time when all budgets are under review a "measurable ROI spend" can be justified more easily.
And once the analytics are digested and decisions made thereon, there aint no going back to the way things were.
All Comments
and figure it out
-- ads per page
-- whether they show ads on search pages (many times they choose not to)
-- revenue share ("smart pricing")
-- bid rate accepted
For years SEM demand exceeded supply, which led to inflated CPC rates. While their content network continues to grow, I would imagine Google's search inventory is much flatter. If SEM demand is softening, and CPC rates declining, can they make up for it by opening more supply, or does that make CPC rates decline further?
There are also people who won't search for my company but instead will search for the t-shirt they saw. This multiplies the opportunity for google to benefit from our traditional advertising. So if thousands of companies drop their traditional ads in favor of search google may benefit in the short term, but I think in the long term it hurts them. The death of newspapers and magazines will have a similar effect on google.
Search may be super efficient but searches usually are created by some sort of stimuli that occurs in our life. So as more people shift to search marketing from traditional media the overall stimuli will decrease, which will lead to less searches. Less searches can only lead to less revenue.
Banner/offline advertisers don't like google and like to dream up reasons why it will fundamentally fail. But the truth is they connected all consumers with all advertisers and matched supply and demand in the most efficient and simple manner. You want something you type it and click 'search' and there it is! Now, you do in fact need Banner/Offline advertising and brand building to point that fire-hose in your direction but google won't go away, it will not decrease, and it will only decrease in revenue if there are less dollars in each transaction of that supply/demand interchange (i.e. reduction in RPM/RPC) Look at Yandex or Baidu. They are in communist or post communist environments where advertising is restricted or unnecessary and they still thrive. People still want stuff, people still need stuff and if they have an easy way to find it, they will do it. You may not like it or the rules that they have laid out but they will not go away or subside.
I agree with your point wholeheartedly in mature markets and in consumer staples . But there are a lot of things that people don't need but may want, and advertising is a vehicle to create awareness. A person can not desire something if they do not know of it's existence. Along the same lines a person can not search for something that they don't know exists.
No one needs a Karate Kid t-shirt or a Ferris Bueller t-shirt (although as you point out they obviously need clothing). My point is that google benefits when our ads make people aware of Ferris Bueller and Karate Kid t-shirts because the awareness creates a search opportunity. Less awareness = less search opportunities = less revenue.
You pointed out "You want something you type it and click 'search' and there it is!". My point is that you have to want something first, and I've never searched for something I didn't already have an interest in.
"People don't buy clothing and food because they are advertised to, they buy it because they are cold and hungry..."
I think you are way, way off the mark there. I just bought 3 T-shirts, I've got loads. I'm not cold. But the email that Threadless sent me appealed to me aesthetic tastes, and I spent money.
I do think people buy some stuff because of basic needs, but more than half the stuff we buy we don't need and it was likely to be an ad that put the thought in our brains in the first place.
buying again when the numbers are out
I am bullish on GOOG and bought in anticipation of a bump with the release of Thursday's numbers.
Plus GOOG has shown many signs of panic/desperation:
a- aggressively contacting webmasters and asking them to implement more ads (eg adsense for search)
b- running remant inventory (eg no-revenue ads for youTube and other goog properties)
c- cost-cutting, layoffs, etc
Unfortunately their rev stream is not yet diversified to be immune to the worst part of web ads : their pyramid structure, as sites that sell ads often buy traffic with ads and the arb chain can swiftly collapse.
Since the cost cuts are in response to a change in market they will likely not show much effect yet on a trailing revenue report...
JMHO
How sweet it is to be loved by GOOG.
The one (the only?) nice thing about this recession is that more ad dollars are going to move online and never look back. As we all know, the ROI is measurable online and at a time when all budgets are under review a "measurable ROI spend" can be justified more easily.
And once the analytics are digested and decisions made thereon, there aint no going back to the way things were.