Google stock spikes after reporting better than expected Q2 earnings
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It's no surprise that after the "mobilepocalypse" earlier this year we're seeing mobile profitability grow for Google.
Google effectively forced advertisers hands in bundling their inventory and is agressively raising min CPC in a number of categories (2)
And they are breaking many of their OWN rules about how aggressively one can promote advertising on mobile - excellent, and entertaining breakdown of that here -> http://www.seobook.com/google-goes-mobile-unfriendly
I don't have much of a point other than sharing some of the information behind what's actually driving these earnings, and the major changes I've seen / experienced as a guy that spends a lot with the GOOG.
(1) http://www.wsj.com/articles/googles-results-top-expectations...
(2) http://searchengineland.com/google-showing-fewer-ads-per-sea...
* http://www.zdnet.com/article/googles-mobilegeddon-moves-hitt...
Perhaps Google is trying to boost CTR / relevance in order to attract/retain the more valuable advertisers (who would probably otherwise weight Facebook more highly for its better targeting). I really wonder how much of this growth is just Google (and Facebook) extracting more marketing dollars from the biggest spenders.
Edit: looking over this thread, there are several rather mild comments that got strong downvotes. Looks like the followers of this thread were indeed inordinately pro-Google.
As for the third link, search ads are not the same thing as mobile display ads from the user's perspective. Remember that in the other case (mobile display ads), Google is probably selling those ads, too.
There are other reports out there & some of them do great breakdowns of click volume, click costs, click values & so on ... based on things like: device type (desktop vs tablet vs cell phones, or even across operating systems), branded keywords vs unbranded keywords, text ads vs PLAs/shopping ads, etc.
There are many such reports, but the SEM company which regularly puts out the best report on this front is RKG (which was bought out by Merkle last year http://www.merkleinc.com/news-and-events/press-releases/2014... and even after the buyout is still putting out great reports each quarter).
RKG's most recent report is downloadable here http://www.rimmkaufman.com/digital-marketing-report/ & it is something I read (and recommend) every quarter. :)
In the report, they stated they saw Google dramatically increase minimum CPC on own brand keywords over the past year, that brand keyword cost was up 39% YoY, and that Google was now charging brands more for clicks on their own brand terms than Bing does. You can see a quick review of their report here http://searchengineland.com/us-paid-search-growing-but-at-sl...
And there might be multiple factors in Google showing fewer ads. Some general assertions and/or hypothesis on potential drivers...
A rise in minimum CPCs on brand keywords might block out some of the lower value 3rd party arbitrage on the branded terms, Google might be showing larger ads (with more ad extensions) above the organic results & fewer ads in the right sidebar, some categories might have PLAs / shopping ads performing so strong that there is less need for text ads, in some categories (like hotel search) Google has effectively turned much of the "organic" search result set into another layer of ads via their hotel price ads, Google includes affiliate links in their knowledge graph, over time more of Google's search volume is on mobile devices with a smaller SERP interface & no right rail to show ads in, over time more of Google's search volume is in emerging markets with less shallower and less mature ad markets, etc etc etc
A few other things worth mentioning on their general economic trends: on smaller devices partners (outside of the big one in Apple) are easier for Google to squeeze out & represent a smaller share of Google's ad revenues, over the last couple years the partner network keeps comprising a smaller percent of Google's overall ad revenue (numerous sources on this front, like http://www.siliconvalleywatcher.com/mt/archives/2013/10/anal... & http://blog.pagefair.com/2014/adsense-smoking-gun/ ), Google is getting higher revenue from clicks on Google.com & their regional search properties but the YouTube pre-roll ads generally go for less money (since they are earlier in the consumer funnel than search is & have less intent than a search does) & drag down the aggregate click price (because Google counts YouTube video ad views as clicks).
One other thing worth mentioning in terms of mobile is that while the mobile click values (and thus CPCs) are lower, Google offsets that by dominating the mobile interface with ads. 3 years back I wrote this post http://www.seobook.com/mobile-seo highlighting how Google had over double the CTR on mobile search ads as they did on desktop search ads. The top graph from that post came from an RKG quarterly report for that quarter.
https://twitter.com/danbarker/status/439125570115223552/phot...
And they link directly to Wikipedia, driving traffic to their site, so they're not really wrongfully stealing the data.
However, for sites that do monetize through ads, Google's 'scraping' of the content is indeed stealing if the content would 'organically' draw more clicks otherwise.
It makes sense Wikimedia didn't see an immediate donation drop. In terms of a conversion funnel, the people who are using Wikipedia for the first time are not likely to donate. My guess is most of the people who are most likely to donate a small amount here or there are the regular users who regularly seek out the site. The drop in donations due to the lower exposure would take years to kick in, because now with 20% or 30% fewer users, there will also be less new future power users who would donate in say 2018 or 2019. But offsetting any decline there for a company making over a billion a month in profits shouldn't be too substantial. Sergey Brin donates a half-million a year grant to the Wikimedia foundation & Google has also donated a few million.
It is also worth mentioning the knowledge graph now often contains affiliate links for things like music, ebooks, and so on. Over time more and more knowledge categories will have paid affiliate links in them (say booking a restaurant, heading to a concert, etc.)
In some cases Google may temporarily make a link type free to try to drive adoption and awareness, but over time it will be the same sort of scrape-n-displace they've done with hotel bookings. They not only turned the "organic" hotel search listings into a second set of paid ads, but now they are also testing having some users convert and buy the hotel booking while on Google.com - just like they are doing with their car insurance offering. And they have also added links to cityname hotel searches in their knowledge graph in order to drive more people into that "almost nothing but ads" funnel.
You can see the net effect of that sort of displacement on an industry by looking at all the consolidation in travel. Expedia acquired Travelocity and Orbitz. That leaves Expedia, Priceline & TripAdvisor as the remaining 3 big players. And even with TripAdvisor Google offered them and Yelp an ultimatum to allow Google to scrape/steal their reviews & if they wanted to opt out of that theft then they could use a robots directive to block Googlebot from indexing their site. That monopolistic abuse was so brazen it actually managed to draw the interest of regulators and politicians. Eric Schmidt did a fantastic job of misdirection & fibbing at the 2011 congressional hearing (ref http://www.benedelman.org/news/040115-1.html ) but the regulatory & political reviews forced Google to back away from at least that form of monopolistic bundling.
Though, of course, the same sort of behavior continues to this day in other forms. From just yesterday there's both https://twitter.com/chrispirillo/status/624630005734113280 & https://twitter.com/jeremys/status/624675646694780928
So, iow, business as usual.
Which both look in great shape for the Post-PC future having control of the 2 most dominant mobile platforms.
I'm still not convinced.
They meet anyone's definition of a personal computer. You can draw a straight line from the first Macintosh to the iPhone. The fact that they evolved out of the phone form-factor and are called "smartphones" may be confusing but it's also irrelevant.
As a bonus, on my last trip, my laptop's hard drive had a corruption issue which I couldn't easily fix without wiping the drive. I should have had a backup laptop with me. Luckily I was able to borrow my wife's Windows Surface Pro & was flying back the next day after my laptop broke. But from my fear of working on laptops I really think the people who mention doing all their work from the phone are either crazy or they are thinking far into the future or they count chats / meetings at coffee shops as encompassing most of their work. :)
Granted, cell phones might eventually might get much better with keyboard and display hookups, but even the frequent moving them around (and the smaller size causing hot components to be closer together) makes them more likely to eventually run into some sort of issue than a desktop computer which just sits there & has more space to dissipate heat and such.
What does that mean in this context?
I've plugged my phone into my computer 2 or 3 times in the last year.
When I was doing mobile device I'd do it more often of course, but using that as some kind of line is like saying that computers haven't taken over cars because you can't program you car in your car.
It's also confusing where Google is going with some of their acquisitions e.g. Nest was expensive and arugably unnecessary and the self driving car is solid technology with very poor product positioning i.e. existing car manufacturers have their own technologies and don't want to bet their business on Apple/Google.
It seems like Google desperately wants to be a consumer company like Apple when in fact they would be much better servicing business and diversifying their revenue stream. AWS and Azure Cortana for example both should have been available from Google years ago.
I also don't think Apple is in particularly great shape. They are still overly reliant on the iPhone. What's going to happen when people stop buying iPhones? What is Apple going to do? Apple is also desperately looking for that next big thing.
>their hold over the Android platform isn't particularly strong (only via Google Play Services)
It's never been stronger. An Android phone released without Google Play Services and the Play Store, outside of China, is as good as dead in the water. Google is also the steward of Android contributing nearly all of source code and doing all of the R&D. Without the stewardship of Google, the gaggle of OEM clusterfucks would be releasing incompatible smartphones to lock customers into their ecosystems.
>It's also confusing where Google is going with some of their acquisitions e.g. Nest was expensive and arugably unnecessary and the self driving car is solid technology with very poor product positioning i.e. existing car manufacturers have their own technologies and don't want to bet their business on Apple/Google.
Nest is going to be Google's IoT company, I believe, and they're going to play an integral role in defining their vision of IoT. As for their self driving cars - the same could be said about Tesla and look what happened there. It's all about disrupting industries, not trying to make deals with the players.
There are plenty of solid reasons to doubt Google given the points that parent-of-parent draws:
* Android was purchased and has plenty of product sharp edges. E.g. there are several ways to send texts. There's the issue of fragmentation. The new Google Photos has embarrassing auto-tags for African-Americans. Google has a solid whole product right now, but so did RIM. They will need to push really hard on projects like Tango and Project Fi to compete in future markets.
* Nest is garnering a reputation for being untrustworthy due to absurd bugs like: https://www.youtube.com/watch?v=BpsMkLaEiOY
* Google is the most published self-driving car manufacturer, but w/out a shipping product they aren't clearly a leader. All early reviews of their car indicate that it's currently too conservative. There's also an issue: do people actually want the whole product? It looks like Tesla and Mercedes will very likely beat Google to market with core self-driving features.
I agree with parent-of-parent that Google appears to be trying to position itself more aggressively in many consumer product markets. Google is an excellent technology company, but most of their products have been niche hits. There's plenty of room for their competitors to leverage better customer relationships to own good chunks of the markets that Google seeks to own.
And how is this a sharp edge?
> There's the issue of fragmentation.
July 2015 and still talking about fragmentation? What problem do you think is fragmentation?
> The new Google Photos has embarrassing auto-tags for African-Americans.
ONE case and has nothing to do with Android
> Google has a solid whole product right now, but so did RIM.
And this can be said about Apple or Microsoft
It was purchased 10 years ago. What's left of the original purchase exists in name only.
>There's the issue of fragmentation
Speaking of fragmentation. How well do new iOS apps work on older iOS devices like the iPhone 4? I'm guessing not very well and probably not at all. App fragmentation on iOS is the real problem.
>The new Google Photos has embarrassing auto-tags for African-Americans.
It's an algorithm. It made a mistake and it learned from it.
>Nest is garnering a reputation for being untrustworthy.
Hasn't this been addressed by Nest?
(The former has voting rights)
The A shares are essentially inconsequential right now because voting is controlled and concentrated by the B share owners.
In this scenario, the class C shares will fall dramatically because the financial value of Google will be nearing nothing, but it's likely that the value of class A shares will skyrocket. Because an activist needs virtually all of them to rest voting control from the founders, there's a "corner the market" situation where the last few remaining holders can demand very large prices for their shares.
If there is a big difference in price then that's an arbitrage opportunity for somebody, in the end all shares have the same claim on the company and will get the same payout if Google is bought or split up. In this case there would be a bunch of people buying class C shares in anticipation of the activist shareholders winning. Additionally, the price of the voting shares won't go up that much because the activist investors can't pay more than what they perceive the value of the company to be.
It's much like how Porsche cornered the market in Volkswagon shares. Until the last couple hours, the market at large had no idea how close they were to a corner.
Also, remember that the price of a stock is set at the margin, but the value of one's holdings is an average. Imagine that an investor has amassed 100M shares of Google at an average price of $20. If they get to 100,001K, the value of Google will shoot up to $50. It is rational for them to pay any price up to $3M for those last 1000 shares, because their profit if they get them all is $3B, but if they are missing even one of them, they get nothing.
Same reason eminent domain laws exist: without them, it is rational for a large organization to pay any amount up to the total value of the project to the last few holdouts that are preventing it from being completed.
It'd require one of the two of them to defect for such a scenario to come to fruition.
[1] http://www.forbes.com/sites/chuckjones/2014/04/02/google-sto...
GOOG was already a traded ticker so that never had any voting rights? or it got changed after the split?
http://techcrunch.com/2014/04/03/google-is-splitting-its-sto...
Thanks to everyone for responding so kindly and quickly to my queries.
[1] some elections may have statutory requirements that a majority of each stock class vote in favor, such as tender offers, etc.
It's clear that it's a volume "let's hit users with tons of stuff they just searched for on Amazon", not a surgical strike "let's get users to buy what they need for their own life based on all the stuff they do through our platforms"
In the last three months I've noticed three string queries on Google give me back results with two strings and then one of the strings will have a strikethrough. Sometimes this spans multiple pages. This is terrible
After many years of things like 20% time, no one at Google has created anything that monetizes at a level close to ads. Why would they double down on what hasn't worked?
I'm pretty sure Google doesn't really have a plan to monetize any of those things (other than ads), but I think it's also pretty cool that a small minority of the company makes enough money to let the rest do pretty much whatever.
Whether it would generate revenue I dont know but testing it out should be easy.
Pick a small country - provide full unlimited search API access for a year to anyone and see what gets built.
unrelenting (or relentless) probably is.
Honestly, chances are that you don't. Everyone says they will, few do.
I can verify all of these statements.