Google’s 10K included an alarming nugget about the possible ongoing impact of click-improvement programs on the company’s near-term revenue. As you’ll recall, one reason Google gave for its light revenue in Q4 was the reduction of “accidental clicks.” Based on the language in the 10K, it appears this impact may continue in Q1 and beyond.
The warning comes after the standard language about slowing growth rates due to size (which appear in every SEC filing and can be ignored), as well as more specific cautions about Google’s ongoing quality-improvement programs (which have appeared in previous filings):
In addition, the main focus of our advertising programs is to provide relevant and useful advertising to our users, reflecting our commitment to constantly improve their overall web experience. As a result, we may continue to take steps to improve the relevance of the ads displayed on our web sites and our Google Network members’ web sites. These steps include removing ads that generate low click-through rates or that send users to irrelevant or otherwise low quality sites and terminating Google Network members whose web sites do not meet our quality requirements. In addition, we may continue to take steps to reduce the number of accidental clicks. These steps could negatively affect our near-term advertising revenues.
The “accidental click” part of this warning (in bold) is new. It did not appear in the company’s Q3 10Q. It’s possible that this is just a locking-barn-door-after-horse-gone addition, but if “accidental click” reduction were unlikely to affect revenue in Q1 and beyond, we doubt the company would have included it.*
*In the original version of this post, it was not clear which portion of the above paragraph was new. The bold sentence is the only part that is new language.
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