THE GOOGLE INVESTOR: Ad Spend Roaring Back, But Google Adrift

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GOOG Slips Modestly Through Mid-day
The stock has been range-bound ($560 – $570) for the past 2 weeks, as the market awaits Q1 results. GOOG trades at 18x 2010 EPS and 19x Enterprise Value / EBIT.  Potential near-term catalysts include the March quarter earnings release on April 15th; updates on changes to paid search results; Android adoption; and benchmarks surrounding newer initiatives, which have mostly been disappointing (Wave, Chrome, Base, broadband network, mobile ads, etc.). Google’s main challenge remains that search is maturing, and the company has yet to develop a strong second growth engine.

Google Benefiting From Rebound In Online Advertising, Look For Strong Quarter (Market Watch)
Google is largely expected to post a solid quarter when it reports next Thursday. Out this morning are a few positive reports:

  • Justin Post published two research reports on Google this morning. First, a Search Engine Marketing Professional organisation (SEMPO) suggests that search advertisers will spend 14% more in North America during 2010 than in 2009.  Clearly this is good for Google, which should grow revenue 12% this year according to Post.  In addition, Google remained the number one search property in March (it’s pretty much a one-horse race at this point), with 176 million visitors or 16% year-over-year growth. YouTube visitors were also up 24% year-over-year to 103 million.
  • Susquehanna analyst, Marianne Wolk believes that Google’s strengths in the mobile ad space are substantial advertiser reach, favourable pricing to publishers, technology and cross platform capabilities. Weaknesses include limited mobile display and a less “owned” target market. Overall Wolk believes Google is well positioned to take on Apple. She maintains her Positive rating and $735 price target.

Google / AdMob Approval Gets Help From Apple’s Mobile Ad Efforts (The Wall Street Journal)
Steve Jobs unveiled Apple’s mobile advertising platform, iAd yesterday. The new system “could end up helping Google defend its acquisition of AdMob.” As the FTC decides whether or not to challenge the deal, “Google has been arguing that mobile advertising is a nascent and competitive field. Earlier this week, a Google spokesman referenced Apple’s expected entrance into the market in a statement defending the deal’s competitiveness.” An AdMob spokesperson even said that Apple is “going to be a strong competitor for sure.” And doesn’t Google know it. The two have been at each others’ throats in just about every market it seems recently (mobile, cloud computing, among others).

Google Hiring! Great News For The Online Advertising Market (AdWeek)
Last year, Google had its first layoffs ever, firing about 500 ad sales employees. The cuts were part of a re-organisation following US sales boss Tim Armstrong’s departure to AOL. Company officials told AdWeek it plans to hire over 500 staffers in positions ranging “from a strategic partner development manager within the Google TV Advertising group to a display sales operations manager, media and platforms at AdX (Google’s exchange).” The move is an indication the company believes the rebound in online advertising is sustainable.  This should instill some confidence in GOOG investors.

YouTube Introducing New Feature As Incentive To Increase Traffic (Business Insider)
YouTube is introducing a new “as seen on” feature that will credit and link to sources driving traffic to a particular video. When a blog drives a significant (not yet specified) portion of a YouTube video’s traffic, an “As Seen On: ___” link will appear beneath the video, linking back to the referring site. Nick Saint at Business Insider believes this provides web publishers with an incentive to send yet more traffic to YouTube in the hopes of picking up referrals from the video giant. And more traffic means more ad revenue. Google is still experimenting with the details of the feature, which is only live on select videos for now.  The plan is to roll it out universally as a permanent feature.

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