Earnings Whispers

It's been a not so great quarter for earnings in our world, and now comes news (via SBeat) that a Yahoo employee (Amr Awadallah) is posting musings about why he thinks Google might be in line to miss earnings, or, at the very least, has employed tried and true…

It’s been a not so great quarter for earnings in our world, and now comes news (via SBeat) that a Yahoo employee (Amr Awadallah) is posting musings about why he thinks Google might be in line to miss earnings, or, at the very least, has employed tried and true tricks to increase its revenues in the past, and is not doing so this time.

This is why I love the blog world. You keep finding gems like Amr.

14 thoughts on “Earnings Whispers”

  1. The Variable-Term-Pricing (minimum bid) was introduced only in the 3rd week of August, so i guess it would have had a big impact on Q4 than Q3 (because advertisers take time to change bids)…

    So for this reason i bet Google would report a terrific Q4 and as a symbolic measure i also bought 10 shares last friday 🙂

  2. One of Amr’s points seems correct: the increase from 2 to 3 in the number of sponsored links above the organic listings (as opposed to the boxes on the side).

    This UI change is likely to have caused a one-time jump in clickthrough rates. I am currently conducting an eyetracking study where we let people use whatever website they want for a variety of tasks, and (no surprise) they tend to start at search engines.

    We are still in the data collection stage, so I don’t have formal statistics yet, but from watching the gaze replays, it’s clear that many users tend to have a lot of fixations in the upper-sponsored area (the colored rectangle on top of the organic listings). Qualiatively speaking, I would say that these fixations are a good deal more than what users spend on the right-hand listings. In fact, often fixations in the right-hand sponsored listings come *after* users have clicked a link in the left column. (There’s often about a second between clicking and when the next page starts rendering, and people’s eyes often go to secondary areas of the screen during this time.)

    Of course “looks-after-clicks” are much less likely to result in any business, which is one reason the top sponsored results work better: they seem to get more “looks-before-clicks”. (Again, this is preliminary observations from the qualitative experience of sitting through sessions – systematic results will be reported on March 29.)

  3. Hi John & Jakob,

    It sounds like clicks convert better to revenues out of these top (“premium”) spots, at least on popular mainstream terms, according to the Atlas Research studies.

    So if commercial traffic is being better monetized AND it also converts better for advertisers, it would have been full steam ahead at a higher average revenue per page in Q4.

    Countering that was an entirely different phenomenon, the introduction of a new Quality Scoring system to replace the old ad ranking formula. The result of this seems to be the removal of some lower priced clicks from the system (fewer ads showing on some queries). While this might have dampened revenues slightly, it seems inevitable that Google in Q4 will have significantly reversed the stagnating trend in average CPC’s.

    Overall revenues may be at or slightly below expectations, but profit margins should surpass expectations. Presumably, if you work for Yahoo, you don’t manage a wide range of AdWords accounts. We do and I can’t for the life of me see any reason to doubt that Google had a monster Q4. AdWords runs very efficiently compared to Y!SM.

  4. If Google lost revenue from removing the lower priced CPCs then they certainly lost profit margin too. Reversing the stagnating average CPC is a good thing only to the extent that it doesn’t cost them clicks.

    That part is easy. What is hard to figure out here is what this change might mean to the AdSense network. Could it mean higher CPMs for publishers and therefor more impressions?

  5. Hi John In Australia Yahoo! has teamed up with Channel Seven (TV network), to help stay in the came. I think that there was a strong perception that Network Nine – PBL, NineMSN – Microsoft, and Google were racing ahead. It’s going to be interesting to see how Yahoo! and Seven progress.

  6. Interesting to me is the degree to which Yahoo can affect Google’s revenue by manipulating the revenue YAHOO shares from it’s Publisher Network (beta).

    What if Yahoo decided to pay out a 100% rev share for 6 months as an incentive. Google would see a HUGE drop in Adsense revenues which now comprise 43% of total Google revenues. Yahoo could keep up this pressure for some time.

    Would it be legal for Yahoo to short Google and then announce this move?

  7. Amr doesn’t seem to be contemplating the number of new Adwords account that are created every day, specially in a $100 billion dollar industry in the U.S. alone. There is so much room for growth, even a small gain of penetration would represent in millions of new revenue for Google.

  8. Hello again, all of you –

    Amr makes some interesting points, but the one regarding Google’s increase to 3 North ads is incorrect. In my industry there have often been up to 3 listings for at least 2 years now.

    Perhaps a grain of salt…

    Good luck to all you gamblers!

  9. Google is also hiring like nuts, 800+ people in Q3, on top of 700+ people in Q2 (i.e. a 1/3 of Google’s work force joined in these two quarter). There is two downsides to this: (a) they are hiring lower quality folks (we interview same folks and see who they pick)
    Amr Awadallah is so wrong about Google hiring practices. I know so many great engineers from MS DRM team who failed to make it to GOOG. According to me Yahoo has the worst talent amongst GYM.
    90 million users in Yahoo Groups. 2 billion minutes/month on Yahoo games. 250 million Yahoo Mail users, supposedly largest in world. 2 billion images on Yahoo photos. Yahoo still can’t generate REVENUES

  10. Well according to google i’m the worlds largest individual adsense publisher. In the last little while they have made a lot of effort reaching out to the top publishers. I expect 2006 will see many improvements to adsense. From what i’ve seen of YPN they will need to cut ties to spyware/abcsearch/ shady domain hosters to be anywhere near competitve. Yahoo also doesn’t offer a premium program so that will hurt the recruiting drive.

  11. Yahoo! has more Content, more registered Users, more total PageViews than
    Google (and has had this lead for a while now) and YET, STILL, does
    not beat out GOOG in revenue or profit by a large margin. This is
    in spite of huge ads plastered all over Mail, Groups and what not.
    Not to mention a 4-5 year lead in building and maintaining a
    gigantic Internet serving infrastructure.

    Either they’re incompetent, Or they like to be #2 as this article
    seems to indicate (I took it as an early April Fools from Yahoo
    but it seems to be legit):

  12. John, after reading Amr Awadallah’s latest on why GOOG will miss Q4 estimates I came to the conclusion that he missed the boat on his analysis. His assumption that GOOG only generated 8% PV increase from Q3 is the basis of his argument vs the required [Whisper] growth of 30% or $2.05 billion revenue. Alexa also showed an 8% PV increase from Q3 but it is on a per user basis. He thinks that the difference between the 8% PV increase and the required 30% growth cannot be accounted for by Revenue per Search. I think that the increase in Reach, an additional 10% from Q3, plus market growth & pricing increase from Q3 were more than enough to account for that difference.

  13. In Dec my CPC was about .65 (newbie). Now it’s in low .30s with same CTR. As the number of newbies decreases Goog’s avCPC has got to go down.

    BTW we are also using Adwords to promote an Adwords competitor. It’s works nicely. Sweet.

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