Google's multi-billion dollar apples

Google's multi-billion dollar apples

Summary: Google's costly apple orchard.

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TOPICS: Google
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Google CEO Eric Schmidt began yesterday’s 2006 Q4 report to Wall Street with a familiar refrain:

"Business continues to be very, very good here at Google and we are very happy to present another very strong performance from the company."

How good? 
Google reported revenues of $3.21 billion for the quarter ended December 31, 2006, an increase of 67% compared to the fourth quarter of 2005 and an increase of 19% compared to the third quarter of 2006. 

GAAP net income for the fourth quarter of 2006 was $1.03 billion as compared to $733 million in the third quarter.  Non-GAAP net income was $997 million in the fourth quarter, compared to $812 million in the third quarter.

Google’s corporate positioning is that everyone wins big in the Google ecosystem: 

Google's utility and ease of use have made it one of the world's best known brands almost entirely through word of mouth from satisfied users. As a business, Google generates revenue by providing advertisers with the opportunity to deliver measurable, cost-effective online advertising that is relevant to the information displayed on any given page. This makes the advertising useful to you as well as to the advertiser placing it.

Google is certainly winning as a corporation. Are all economic actors within its ecosystem winning equally? 

Jonathan Rosenberg , SVP, Product Management, offered a mini case study in the “apples and oranges” of the Google Pay Per Click keyword bidding ecosystem, aiming to dampen any fears of across the board declines in keyword prices:

In emerging markets versus developed markets, you basically have the dynamic that the newer markets have lower prices. So what that tends to do is, since they're faster growth, that tends to put downward pressure on CPC. There's another dynamic that you have in terms of Google.com, which has actually been growing faster than the other properties and has a higher CPC, so that actually puts a little bit of upward pressure on CPC. On the other hand, with that AdSense for Content, we're adding a lot of social network-type traffic in, particularly with the MySpace deal. So that puts downward pressure on the dynamic.

There's also a lot of other dynamics, particularly during the holidays, where the advertisers are searching very aggressively for more keywords that can allow them to get more leads. When they do that, they tend to find some of the previously undiscovered keywords, so they get lower CPC keywords.

So there's a whole combination there. There's no data that suggests that on an apples-to-apples basis, we are seeing a decline in CPCs of like keywords.

The Google apple orchard is all good then, according to Rosenberg. His analysis suggests, however, that those partaking in the Google fruits pay diverse prices depending on the crop.

ALSO: Google Checkout is a loser, really and Google Radio NOT a category killer  and Google still relying solely on search

Topic: Google

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