A chink in the armour, but Google is still on the up

by Staff, Media Week 26-Jul-07, 08:00

LONDON - So Google has finally reported a set of financial results that aren't mind-bogglingly positive. In a rare turnabout, the search behemoth (it is compulsory, by the way, to twin the word behemoth with Google) saw its share price fall after the company's second-quarter figures were released late last Thursday night UK time.

In line with other media owners and agencies, it is suffering, among other things, from having to pay high costs for techies and sales staff that understand the digital space. So should we be getting the hankies out for Larry Page and Sergey Brin's unfeasibly successful offspring?

Err... not quite yet. Google still increased revenue by 58% year on year - 62% in the UK. Second-quarter revenues in the UK were $600m (£292m). Most publicly quoted firms would happily settle for such "disappointing" returns.

Growth in advertising on Google sites was up by three-quarters, and revenue from ads placed on partner sites through AdSense was up by more than a third. Make no mistake - these are still stunningly good results.

Traffic acquisition costs are up, which some analysts attribute to media owners playing hardball over the share of ad revenues they take from AdSense.

This can be explained as a sign of a market maturing and taking on the hard-nosed trading environment other media have experienced for years. Or it could be fuelled by Google's urge to expand at the same frightening rate it has up to now - spurred on by the financial community.

Either way, it is good news for media owners, though it may not translate into better deals for advertisers - who will find themselves placing higher bids for ad spots.

AdSense is being reshaped for the mobile environment, and Google's technologies will facilitate video search services. It is also dabbling in off-the-shelf software applications, possibly funded by advertising.

It is all part of the drive to grow, represented by Google's controversial proposed acquisition of DoubleClick, by which it hopes to dominate online display in the same way as it does search, and web communications tools business Postini.

Like Microsoft in its heyday, I suspect Google still has a long way to go before it hits its growth ceiling.

Steve Barrett is editor of Media Week

steve.barrett@haymarket.com

Comments

Jim Murray Jones - 21/09/2007

It could only be a matter of time before media owners, or networks of media owners, begin to build their own version of adsense and thus disimtermediarise Googles position. Whilst Google may dominate the search highways, media owners could rightfully claim a more protective and brand supportive environment through which to place cost per click advertising links. More importantly the balance of power would shift, with potentially fascinating results.