Google releases their Q2 earnings today. It will be interesting to see how their results will be received on Wall St. for a number of reasons. Google is one of those companies that people measure the economy as a whole against to some extent. As such, today has sort of a groundhog day kind of feel to me. I don’t typically spend a lot of time watching economic news – even in good times, but i’ll be paying a little more attention to it today.
Google is expected to report their second consecutive quarter of single digit revenue gains. Now, the economy being what it is, a lot of folks would be plenty thrilled with an any-digit gain. Google isn’t most however. Google stockholders are more accustomed to quarterly growth of 30% or better. So, while single digit growth for a second consecutive quarter would be pretty good news for some, it ain’t so hot for Google.
The fact that revenue growth was relatively flat again leads us to the all important ‘why’ question. Has Bing been a factor? Is this as bad as it is going to get for Google? When will they get back to ‘normal’?
First lets look at Bing. Microsoft has actually managed to make some waves in the search space for the first time in as long as I can remember. Bing was launched with a big marketing budget ($100 million buys a lot of ads), some really slick commercials, and most importantly a search product that was distinctive, effective and extremely consumer-centric. In short, Bing was pretty cool. As a matter of fact, they snagged almost a full half percent of search market share. The problem here is they most likely picked up the lion’s share of that gain from the company they need to buy (Yahoo) instead of the company they need to compete with (Google).
Google is so far out in front of both Bing and Yahoo in terms of market share it’s hard to imagine either one of them catching up. Certainly not going to happen separately and even combined it would take a LOT of movement. Google still owns 64% of search. Yahoo has around 20% and that $100 million dollar marketing campaign and a cool new Bing has taken Microsoft from 8% to a whopping 8.5%. In short, if the question is whether or not Bing had a lot to do with Googles flat revenue earnings, I’m no expert, but I’d have to say probably not much.
The second question; ‘Is this as bad as it gets for Google’ is certainly going to be asked a lot over the next few weeks. As far as I’m concerned this is largely not even up to Google. I think it is reasonable to look at Google as a barometer of sorts for the larger economic issues facing us today.
If you’ve been watching economic news for optimism lately though, you will know that there isn’t a lot of it floating around. The Federal Government owns controlling interest in General Motors for crying out loud. The best solutions we seem to be able to come up with for our problems so far seem to be raising taxes and socializing banks and industries. Is the worst over? Who knows. With Google, 2 quarters of single digit revenue growth is pretty bad. I hope it doesn’t get any worse for them because if it does, what is everybody else going to be looking like?
As for Google getting back to ‘normal’ – meaning 30% + growth quarters, I think this is the more interesting Google-related, search industry type of question. Google’s revenue growth is is large part due to the huge lead in market share they have over everybody else in the space.
So far, Bing’s growth, while measurable, hasn’t been overly threatening. Things change fast in this world though. There are certainly possibilities wherein Bing continues to gain market. Maybe they finally do buy Yahoo, maybe they do something else. Maybe Yahoo is somehow magically rejuvenated and starts closing ground – anything is possible.
Point being, if another property or properties manages to close that gap in market share on Google, they may not realistically be able to expect to get back to the 40% growth quarters – barring some new plans of their own – at all. That certainly wouldn’t mean they were doomed or anything, but I can certainly see a future wherein their dominance may not be quite so pronounced.
