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Showing posts with label google profits 08. Show all posts
Showing posts with label google profits 08. Show all posts

February 13, 2008

Google's Money making machine Slows down

Google ad revenues slowed down as the search engine giant,Google lost ground in the U.S. Internet advertising market for the first time in two years during 2007 due to slower growth in the fourth quarter, market researcher IDC said Monday.

The Internet search giant saw advertising sales growth slow to 40 percent year-on-year in the fourth quarter, down from 50 percent year-on-year in the third quarter, IDC said. That blip cut Google's advertising market share in the United States to 23.7 percent in the fourth quarter, down 0.5 percent from the third quarter.

The decline comes despite continued strong growth in Internet advertising in the United States, according to IDC.

U.S. Internet advertising grew 27 percent year-over-year in 2007 to $25.5 billion, while total U.S. Internet ad spending in the fourth quarter alone rose 28 percent compared to the same time in 2006, IDC said. Companies continue to shift ad spending to online media from traditional media, according to the market research company.

Google's fourth-quarter decline could spell opportunity for its rivals.

A merger between Microsoft's Internet businesses and Yahoo would give the combined company a market share of 17 percent in the U.S. Internet advertising market based on fourth-quarter data, IDC said in a statement. While the figure would leave Microsoft-Yahoo behind, "it would give them a much better fighting chance than if they went it alone," IDC said.

Google could not immediately be reached for comment on the IDC report.

The web search giant delivered 17% growth in its fourth quarter bottom line driven largely by 50.5% jump in its gross revenues. Adjusted net income witnessed 41.4% increase on top of 52% climb in revenues, excluding traffic acquisition costs or TAC, indicating the operating margin pressures on the company, which eventually cast its shadow on the profit.

Given the fear that the U.S. economy will slip into recession, there was a belief that Google, which has its dominance in paid search listings, might perform better as the paid search advertising is believed to be closely linked with sales. In comparison Yahoo!, which enjoys a larger share of display market, is feared to suffer due to any retraction in ad spending. Google, which said it is yet to see the impact of weakening U.S. economy, believes that paid search listings would continue to be a more attractive place for advertisers.

The current quarter revenues falling short of Street estimates raises concern as to how far Google will be able to sell its online advertising as consumers might cut down their ad spending in a slowing economy or amidst growing fear of a recession in the largest economy of the world. Yet, analysts reportedly believe that Google could offset the consumer slowdown through its search query share gains and strong results from its international franchises and Google was undoubtedly one of the best players in internet advertising.