Google/GOOG
From Briefing:
Analysts at BofA and Bear Stearns now believe that Google (and Yahoo/YHOO) will report Q1 above consensus. (Imagine that! -dmg) Bear Stearns comments on Google/GOOG saying their channel checks with marketers and tracking of keyword volumes and pricing data reveals that Google should report a stronger than expected quarter. As such, they increase Q105 revenues estimates for the company from $721M to $731M and increase pro forma EPS estimate from $0.88 to $0.96 (Reuters consensus $0.91). The Bear Stearns analyst believes that the number of advertisers on Google increased meaningfully during the quarter, as more advertisers embrace the paid search platform as part of budgeting goals for the year."
So this is a good moment to delve more deeply into Google's advertising model. The comments that follow are from Jeff Neal...
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Google/GOOG has come up with an advertising service that helps websites generate revenues. The service, called AdSense, is a very expedient and easy way for website owners to display Google advertisements on their site's content pages and earn money. In addition, website owners can provide Google Web and site search to their visitors and earn money by displaying Google ads on the search results page. Basically the website owner gets paid when one of their visitors click on these links.
Many different types of websites are profiting from this approach. For example, the gamut of website publishers runs from the very small and specialized e-tailers to big-time companies like Amazon/AMZN and the New York Times/NYT. However, there are some critics of this approach claiming that the overabundance of advertisements is hurting the integrity of that particular website, and they even go on to say it is like a new form of spam that is turning the Internet into a billboard for Google ads.
The actual revenue being generated ranges from a few hundred dollars a month to more than $50,000 a year for some sites. The amount of money is closely tied to the traffic volume and how long per day the website can be up and running. The AdSense program has worked particularly well for Web publishers by providing them with more opportunities to make money.
For example, one Web publisher stated that he used to have a tough time sleeping because he was constantly worried about his very high monthly printing bill. However, now he has more than 70 websites that cover a variety of different subjects like vehicles, music, video games and much more. Google's AdSense program allows him to earn revenue without paying the high cost associated with print advertising and other marketing expenses.
The online search advertising business is projected to surge to more than $5 billion by 2008 up from $2.7 billion in 2004 according to e-commerce experts. Currently both Google and Yahoo/YHOO dominate this business with Google more than doubling its search advertising revenue in 2004.
The AdSense program has text ads that appear next to search results and operates on a pay-pe-click model. In other words, advertisers only pay if someone clicks on an ad. Advertisers can purchase keywords anywhere from 10 cents to $20-plus per word. These are the terms people enter into query lines when they are searching. AdSense essentially is part of that keyword model and is really just a different branch of Google's AdWords program.
AdSense is potentially a very powerful approach for companies marketing their products because beyond Google's homepage you can reach more than 200,000 participating websites. Small website owners have been attracted to AdSense as a very efficient way of attracting advertising dollars. The procedure is really quite straightforward. The customer only needs to sign up at Google and then some computer code is embedded on the accepted website. Google does all the work from there by matching advertising links from its inventory of customers to the appropriate sites. To get the most out of the AdSense program the advertisements need to be very targeted and that closely related products have their ads grouped and linked together.
As of now Yahoo does not go after small publishers, so in this particular market Google's only AdSense competition comes from a small, privately owned company called Kanoodle. They not only work with small publishers but very large ones as well like USA Today and MSNBC. Kanoodle also sees search advertising as a very lucrative market going forward.
The recent IPO of Google showed that there is indeed growth and investor interest in search engines and search advertising as the stock soared from the original open of $85 per share to a high of $216 per share. Shares of Google have retraced some to currently trading around $185 per share.
According to the market research firm Forrester, look for the paid search market to start to slow down a little bit even though it still has room for more growth. For example, Forrester has indicated they see overall search advertising revenue growth declining almost 15 percent in 2005 compared to 2004. To regain momentum there are issues the industry still must resolve, such as click fraud. There are some crafty Webmasters out there that have set up automated clicking models which clicks away all day and cost the advertiser. Once these types of issues are effectively addressed, look for the search advertising market to resume its phenomenal growth rate.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
But Google/GOOG is by no means done innovating. The company announced several weeks ago a wrinkle to their online maps software...
A bird's-eye view
Have you ever wished you could see what someplace looked like before you got there? A house? A hotel? A freeway exit? We thought you might find it useful, so we've incorporated Keyhole technology into Google Maps and Google Local. Now when you type an address into Google Maps, you can click the 'Satellite' link and see a view of the area. You can zoom, move the view by dragging, and even resize the window just like the normal 'Maps' view. Looking for a new apartment or house? Type in an address you're considering, get a view from the air and, with a quick local search, find out if you can walk to your favorite Saturday morning cup of coffee. Thinking about spending time at the shore this summer? Search for hotels with Google Local and check out the "beach" in "beachfront." You can even see driving directions with real images. We can't promise you'll never miss another freeway exit, but we do think that Google Maps + Keyhole gives you a great way to see and explore your world. But take a look for yourself...
Analysts at BofA and Bear Stearns now believe that Google (and Yahoo/YHOO) will report Q1 above consensus. (Imagine that! -dmg) Bear Stearns comments on Google/GOOG saying their channel checks with marketers and tracking of keyword volumes and pricing data reveals that Google should report a stronger than expected quarter. As such, they increase Q105 revenues estimates for the company from $721M to $731M and increase pro forma EPS estimate from $0.88 to $0.96 (Reuters consensus $0.91). The Bear Stearns analyst believes that the number of advertisers on Google increased meaningfully during the quarter, as more advertisers embrace the paid search platform as part of budgeting goals for the year."
So this is a good moment to delve more deeply into Google's advertising model. The comments that follow are from Jeff Neal...
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Google/GOOG has come up with an advertising service that helps websites generate revenues. The service, called AdSense, is a very expedient and easy way for website owners to display Google advertisements on their site's content pages and earn money. In addition, website owners can provide Google Web and site search to their visitors and earn money by displaying Google ads on the search results page. Basically the website owner gets paid when one of their visitors click on these links.
Many different types of websites are profiting from this approach. For example, the gamut of website publishers runs from the very small and specialized e-tailers to big-time companies like Amazon/AMZN and the New York Times/NYT. However, there are some critics of this approach claiming that the overabundance of advertisements is hurting the integrity of that particular website, and they even go on to say it is like a new form of spam that is turning the Internet into a billboard for Google ads.
The actual revenue being generated ranges from a few hundred dollars a month to more than $50,000 a year for some sites. The amount of money is closely tied to the traffic volume and how long per day the website can be up and running. The AdSense program has worked particularly well for Web publishers by providing them with more opportunities to make money.
For example, one Web publisher stated that he used to have a tough time sleeping because he was constantly worried about his very high monthly printing bill. However, now he has more than 70 websites that cover a variety of different subjects like vehicles, music, video games and much more. Google's AdSense program allows him to earn revenue without paying the high cost associated with print advertising and other marketing expenses.
The online search advertising business is projected to surge to more than $5 billion by 2008 up from $2.7 billion in 2004 according to e-commerce experts. Currently both Google and Yahoo/YHOO dominate this business with Google more than doubling its search advertising revenue in 2004.
The AdSense program has text ads that appear next to search results and operates on a pay-pe-click model. In other words, advertisers only pay if someone clicks on an ad. Advertisers can purchase keywords anywhere from 10 cents to $20-plus per word. These are the terms people enter into query lines when they are searching. AdSense essentially is part of that keyword model and is really just a different branch of Google's AdWords program.
AdSense is potentially a very powerful approach for companies marketing their products because beyond Google's homepage you can reach more than 200,000 participating websites. Small website owners have been attracted to AdSense as a very efficient way of attracting advertising dollars. The procedure is really quite straightforward. The customer only needs to sign up at Google and then some computer code is embedded on the accepted website. Google does all the work from there by matching advertising links from its inventory of customers to the appropriate sites. To get the most out of the AdSense program the advertisements need to be very targeted and that closely related products have their ads grouped and linked together.
As of now Yahoo does not go after small publishers, so in this particular market Google's only AdSense competition comes from a small, privately owned company called Kanoodle. They not only work with small publishers but very large ones as well like USA Today and MSNBC. Kanoodle also sees search advertising as a very lucrative market going forward.
The recent IPO of Google showed that there is indeed growth and investor interest in search engines and search advertising as the stock soared from the original open of $85 per share to a high of $216 per share. Shares of Google have retraced some to currently trading around $185 per share.
According to the market research firm Forrester, look for the paid search market to start to slow down a little bit even though it still has room for more growth. For example, Forrester has indicated they see overall search advertising revenue growth declining almost 15 percent in 2005 compared to 2004. To regain momentum there are issues the industry still must resolve, such as click fraud. There are some crafty Webmasters out there that have set up automated clicking models which clicks away all day and cost the advertiser. Once these types of issues are effectively addressed, look for the search advertising market to resume its phenomenal growth rate.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
But Google/GOOG is by no means done innovating. The company announced several weeks ago a wrinkle to their online maps software...
A bird's-eye view
Have you ever wished you could see what someplace looked like before you got there? A house? A hotel? A freeway exit? We thought you might find it useful, so we've incorporated Keyhole technology into Google Maps and Google Local. Now when you type an address into Google Maps, you can click the 'Satellite' link and see a view of the area. You can zoom, move the view by dragging, and even resize the window just like the normal 'Maps' view. Looking for a new apartment or house? Type in an address you're considering, get a view from the air and, with a quick local search, find out if you can walk to your favorite Saturday morning cup of coffee. Thinking about spending time at the shore this summer? Search for hotels with Google Local and check out the "beach" in "beachfront." You can even see driving directions with real images. We can't promise you'll never miss another freeway exit, but we do think that Google Maps + Keyhole gives you a great way to see and explore your world. But take a look for yourself...
posted by David M Gordon | 5:48 AM
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