Executives from the Googleplex whispered sweetly into the ears of industry analysts and convinced them growth opportunities do indeed exist for the search advertising company.
Just recently, Google CFO George Reyes commented publicly on a slowdown in growth for the company’s business. He also said, “I think we’ve got a lot of growth ahead of us. It’s a question of what rate.”
Investors pretty much just heard the word ‘slowdown’ and reacted in typical Wall Street fashion with a massive selloff that precipitated a big drop in Google’s stock price before leveling off. It wasn’t the way Google wanted to set the tone for its analyst day, which was scheduled for two days from Reyes’ remarks.
Google engaged in a little damage control via a statement it released in the wake of Reyes’ comments playing merry hell with the stock price:
We would like to clarify and provide further information on these statements. As we have stated before, monetization improvements will continue to be a key factor in driving future revenue growth. We still see significant opportunities to improve monetization and intend to continue to focus our efforts in this area.
Moreover, as we have stated in our SEC filings, our revenue growth rate has generally declined over time and we expect that it will continue to do so as a result of the difficulty of maintaining growth rates on a percentage basis as our revenues increase to higher levels.
To summarize, Reyes didn’t say anything that wasn’t already in the SEC documents. Two days later, Reyes and CEO Eric Schmidt participated in an analyst day event for Wall Street professionals and investors. The Wall Street Journal noted Reyes was “relatively more positive” during this event.
Fears over ad pricing, and complaints from large corporate advertisers about higher prices, drew some focus during the event. Schmidt reassured investors that “there is tremendous headroom for improving the quality of advertisements. We see no limit to that at the moment.” Higher quality ads mean more clicks, which in turn means more revenue for Google.
Schmidt deflected the complaints about keyword pricing, saying “there seems to be significant keyword pricing upside.” Meanwhile, Reyes soothed investors regarding the company’s capital expenditures. “We’re going to invest to generate superior returns for all of you,” he said.
The Schmidt and Reyes show worked magic. Shares of GOOG climbed again Thursday, by $11.65 to $376.45 at market close. Two days ago, post-Reyes’ discourse, shares fell during intraday trading from a high of $397.54 to $338.51 before investors bid it back up to $362.62 at the closing bell.
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David Utter is a staff writer for Murdok covering technology and business.
