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Google and the Law Of Very Large Numbers

By - February 28, 2006

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Microsoft’s CFO became famous in the 1990s for his predictions that the company would not grow as quickly as others wished. looks like George Reyes, CFO of Google, is taking a cue. Hey, wait, is this managing expectations on Wall Street, and providing guidance? Whatever it is, GOOG is taking a hit. From a sub required WSJ article:

Google Inc.’s chief financial officer, George Reyes, said the Internet giant’s growth is slowing due to the “law of large numbers” and it will need to find new ways to boost revenue.

The comments, made at an investor conference, surprised Wall Street and triggered a selloff in Google’s shares. In heavy trading, Google shares fell 9%, or $37.70, to $354 on the Nasdaq Stock Market.

The company’s 18-month effort to boost search monetization by tweaking the advertising system has realized most of the gains possible, Mr. Reyes said. Now growth is being driven mainly by organic factors, like query traffic growth, which he called substantial.

“We’re going to have to find other ways to monetize the business,” Mr. Reyes told attendees of a Merrill Lynch investor conference.

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10 thoughts on “Google and the Law Of Very Large Numbers

  1. Wizzbox says:

    Its not JUST the laws of very large numbers.

  2. The revelation may have been the basis for Creating Google Payments as well as other revenue options.

    ///

    Now growth is being driven mainly by organic factors, like query traffic growth, which he called substantial.

    What does this mean exactly?

    This appears too general to offer any insight – other than just a Public Relations cushion.

  3. seocase says:

    Google has to just focus on few more revenue generating streams as they did with search few years ago and I feel they are doing pretty good… just need to be bit more focussed..

    I can’t understand the rationale of making this comment before the Analyst day on friday.

  4. Joe Hunkins says:

    Amr’s points about Google’s monetization challenges, quoted here a few months ago, are coming into common acceptance. I wonder if this shows that the market does NOT incorporate info as fast as most think. In this case the obvious seems to be sinking in s-l-o-w-l-y.

    But of course it’s not like Wall street has ever been irrationally exuberant about … internet stock values …

  5. What no more 2000$ stock predictions?

  6. Kendall Willets says:

    CFO — isn’t that the chef?

  7. Jared Lansky says:

    How about an ad on the homepage? Never going happen but seems premature to conclude they’ve exhausted all tweaking options.

  8. Jared Lansky says:

    How about an ad on the homepage? Never going happen but seems premature to conclude they’ve exhausted all tweaking options.

  9. John says:

    The question that directly hit my mind is “if google’s algorithm is going to absorb the technique of law of large number fully?”

  10. hans says:

    CFO — isn’t that the chef?

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