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Google Earnings Preview
Some things to look out for:
- Street consensus expectations are of $8.38B in revenue and $10.4 in non-GAAP EPS.
- Search seems to have done well over the holiday quarter. Citi analyst Mark Mahaney spoke with lots of people in the search engine marketing industry, who think spending went well. What’s more, eBay beat on revenue yesterday, which suggests ecommerce did well, which suggests in turn that search marketing did well.
- The macro environment is crappy. 50% of Google’s revenue is international, and the macro environment, particularly Europe, is not good. Given that advertising budgets tend to be first in line to get the ax when the economy goes south, this could affect Google. Another way the macro environment affects Google is through foreign exchange and the weak dollar.
- Google is still getting its butt kicked in social. Facebook’s business is growing really fast. While Facebook ads are mostly “top of the funnel” while search is “bottom of the funnel” which means it doesn’t compete directly for budgets with Google, it still comes out of the same bucket ultimately. Google’s response, Google+, seems to be experiencing slowing growth. Where is that?
- Is Google still spending like a drunken sailor on spaceships to the moon? Google has been investing and increasing headcount like crazy, which Wall Street doesn’t like. CEO Larry Page and CFO Patrick Pichette have said that they would be disciplined about it. Will they be?
- How big is mobile? Larry Page has said that mobile is a $2.5 billion revenue run rate business for Google, for a 150% y/y growth rate. Is it still growing that fast?
- How big is YouTube? YouTube revenue is starting to be material for Google. Look for questions on that in the call.
eBay Beats The Street
The strongest points in eBay’s earnings:
- eBay beat the Street on both the top line and the bottom line.
- PayPal accounted for over 36% of Q4 revenue and grew 28% y/y. eBay is increasingly a payments company, as we noted yesterday →
- Marketplace is still growing, it seems its turnaround is indeed under way.
- Mobile is growing like gangbusters. eBay now projects its mobile payments volume in 2012 will be $7 billion in 2012.
In other news…
PayPal announced plans to expand its mobile payments trial with Home Depot. They will install point-of-sale terminals at 51 stores across the country, up from 5 currently. As we discussed in a recent post, PayPal is a burgeoning giant in the mobile payments market→
Zynga has confirmed it’s bought four mobile game makers. The purchases are a smart move– Zynga is a leader in Facebook games but has lagged behind in the mobile arena. But the company is still struggling after going public late last year. Read more about how the company makes money in our explainer here. →
Amazon’s Kindle Fire will be more profitable than expected, RBC says, because the average Fire owner buys about 5 ebooks per quarter, along with other content– more than expected. RBC’s survey also showed that Fire owners were more likely to have considered features over price when deciding to buy– an interesting finding given that many analysts believed the Fire’s lower price compared to the iPad would be the biggest selling point.
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