OK, not exactly. But yesterday’s financial results showed the company was subject to the same pressures, market trends and unreasonable expectations that have confronted other Internet bellwethers such as Yahoo! and eBay.
I had expected Google to beat expectations. But the key word here is "expectations." If you look at what the company actually did, the results were impressive. Google revenues were $1.92 billion vs. $1.57 billion last quarter (22 percent growth, up from 14 percent vs. Q2). So revenue growth has accelerated.
These are very solid figures. They’re just not mind boggling compared with Google’s history of triple-digit revenue growth.
Google investors are a tough crowd — 86 percent growth (vs. last year) wasn’t good enough. Admittedly, Google itself has conditioned expectations and set the bar pretty high with its past performance. But it’s as if investors are saying the equivalent of "we expect a 100-point game every time" (to use a basketball analogy).
That’s just not possible.
There are plenty of reasons to believe that Google’s future performance will continue to be very strong. The company has consumer market-share leadership, which should continue for the immediate future at least. And, according to this MediaPost article (reg. req’d) citing an advertiser survey, marketers perceive greater value in Google advertising than in that of its main rivals:
About 71 percent of respondents said that search ads on Google were effective, compared to 62 percent who considered search ads on Yahoo effective and 49 percent who thought MSN search ads were effective.
In addition, WebSideStory asserts that search marketing produces double the conversions of other types of online marketing. Conversion here is defined as the percentage of visitors who click on a search result and go on to make a purchase or conduct a transaction of some sort. That percentage was 2.3 percent. (For every 100 consumers, 2.3 went on to spend money.)
So search can be expected to continue to attract marketing dollars. And it’s still very much an "immature" medium; we estimate there are only about 475,000 to 500,000 such advertisers across the globe.
Moreover, the Internet is not going away. While there are challenges to growth on the advertiser side (bringing in more small businesses and so on) consumers show no signs of abandoning the Internet or search engines any time soon.
All these factors point to continued strong performance though perhaps not at the triple-digit levels of the past.
Google set up its bifurcated stock structure to partly insulate itself against the "whims" of the marketplace. (And it doesn’t provide guidance for analysts.) That "insulation" isn’t entirely working, as the company clearly feels the pressure to perform and explain why it didn’t do better than expected.
That pressure should accelerate Google’s efforts to diversify some of its revenues and roll out more new consumer and advertiser offerings this year.
Effectively, that means no letup in competition among the major brands (Google, Yahoo!, MSN, AOL), which, as one VC recently put it to me, "are in a feature war," and no rest for those of us who cover them.
Here’s Om Malik’s Business 2.0 piece.