Goldman Sachs: Cuts estimates. Says Google’s relatively disappointing quarter can be blamed on “pruning low quality ads” and an unusually strong Q3. MySpace Revenue was more difficult to drive as well. Paid click growth decelerated from 45% in Q3 to 30% in Q4, which depressed margins. As a result, GS will “reduce our 2008/2009 EPS estimates by 10%/14% to $20.00 and $24.10 given more conservative 2008/2009 revenue growth rates and margins.”
JP Morgan’s Imran Khan: Disappointing paid click growth attributable to four factors:
- Modest traffic growth deceleration,
- Slowdown in travel and financial verticals in the UK,
- Decrease in the clickable area of AdSense text-ads, and
- The Christmas holiday falling at the beginning of the week, which are typically high search volume days.”
Khan believes that despite the recent deceleration, 08 and 09 earnings will likely be buoyed by strong international growth. Social Networking inventory will likely continue to disappoint, however, and will keep TAC rates higher for the immediate future.
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