Is Google Ad Revenue Softening?
February 3, 2012
Google could be in trouble, as Business Insider illustrates in “This Chart Shows How Christmas Never Arrived at Google.” The company’s 2011 fourth quarter numbers show its revenues only increased by 25%. Writer Jim Edwards points out that, compared to all other ad-based businesses, that’s actually a good showing. However, the market seems to disagree; Google stock dropped almost nine percent when the news was released.
Edwards has noted a pattern in Google earnings, wherein the company tends to grow little during the first quarter, but makes up for it at Christmas time. Last year, the December surge never occurred. This could be worrisome for Google stakeholders.
There are several possible reasons for the tepid performance. For one thing, the per-click ad rate has been sliding downward. Also, search for the mobile arena, which is still growing and bound to take over the world sooner or later, has provided a lower ad revenue than regular search. Finally, shoppers are now more likely to go directly to a shopping site like Amazon than to Google their potential purchases.
In summary, Edwards observes,
All of the foregoing explains Google’s sudden interest in newspaper advertising, PR stunts such as the Google+ event with David Beckham, and its continued enthusiasm for Google Wallet. . . . Google needs to get Christmas back on track in 2012 — and that means reminding consumers to use its products for shopping.
Hmm. Reminding and enticing are two different things. Can Google do either?
Cynthia Murrell, February 3, 2012
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