February 01, 2008 | Friday
Google and Yahoo look to display, video post-Q4 earnings calls
By Jackie Danicki - Blogger in Display |Marketing |News |PPC |Search Engines |Google |Yahoo
Google had prefaced its Q4 earnings call with the disclaimer that its profit margins might see a plunge as a result of boosted investments in the business (such as larger salaries to pay all those new recruits, for example). Here are the hard numbers, and what they mean.
Q4 net income: $1.21 billion ($3.79 per share), up from $1.03 billion ($3.29 per share) in Q4 2006
Q4 revenue: $4.83 billion, up 51 percent from $3.21 billion in Q4 2006
They may have fallen short of the Wall Street analysts’ projections, but Google doesn’t seem to think they’re being hit hard by any global economic downturn. Sergey Brin had this to say:
Near as we can tell, we provide such a great ROI (return on investment) that [advertisers] can see and measure, that advertisers have great incentive to get profitable inventory from Google. We have not been able to detect such affects from macroeconomic trends.
Be that as it may, the company is looking to bring in more money from revenue streams other than search, with Google CEO Eric Schmidt:
talking explicitly about entering the display ad business and about the large opportunities for YouTube. Flicking the display switch (via DoubleClick) could result in billions of incremental revenue almost overnight. YouTube ramp will take longer.
I suspect that a few execs in the Valley will be breathing a sigh of relief as Google’s profit gain of “only” 17 per cent captures the media’s attention for a day or two. Specifically, the beleaguered bosses at Yahoo must be grateful to have another business - and their biggest rival, no less - to take a little heat off them.
Yahoo announced earlier this week that it plans to make 7 per cent of its workforce redundant, with 1000 employees losing their jobs. (To compare and contrast with Google, Yahoo actually beat analysts’ projections of 11 cents per share and reported a 23 per cent drop in profits.)
On a positive note, Yahoo also reported 20 per cent year-on-year growth in display and a 30 per cent jump in search revenues.
Back to the negative:
Regardless, Yahoo continues to lose ground to Google. Yahoo’s share of search spending dropped by 25% during the fourth quarter from the year-earlier period, falling from 24.1% to 17.9% of total search dollars...Google, meanwhile, increased its stranglehold on search, going from a 70.5% to a 76.6% share. The company captured nearly all of the search spending growth in the fourth quarter of 2007, compared to the year-earlier quarter.
Yahoo also announced yesterday that chairman of the board Terry Semel, who was ousted as CEO in 2006, has resigned that role.
It is safe to assume that, unlike at Google, no one at Yahoo has been making outlandish vows to work together for at least 20 years. With the company’s fortunes going the way they are, it would be foolish even to think - let alone talk - in such terms.
One more interesting point of note, in light of Google CEO Schmidt talking up the possibility of increased revenues from display and video properties: According to Techcrunch, Yahoo is set to announce its $150 million acquisition of video start-up Maven Networks.
Maven is a video-hosting platform for media sites, including Fox News, CBS Sports, CNet, and Scripps Networks. But Yahoo would probably want it more for its video-ad network, targeting, and insertion technologies.
If anything is clear, it is that both search giants are making attempts to diversify their revenue streams. What one can’t help but wonder is if they are trying to lead the market toward increased ad investment in display and video or if the market is demanding that they go there. I suspect it is mostly the former, but am open to contrary lines of reasoning.
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