This, of course, is somewhat delusional. There isn’t another ad-based business on the planet getting $10 billion a quarter with 25 per cent increases. Nonetheless, GOOG dropped nearly 9 per cent on the news today, to around $584.
There are competing explanations for the trouble at Google. Some see a decline in the quality of its revenues coming from paid clicks.
Others — including my boss — note that mobile search is less lucrative than regular search, and the world is turning more toward mobile.
But it’s not until you examine sequential revenue growth at Google (as opposed to the more usual year-on-year growth, as reported by the business press and most companies) that it becomes obvious that Google’s revenues follow an annual, seasonal pattern.
Like a lot of old-fashioned ad sales businesses, Google tends to have a quiet Q1, business builds through the year, and then it books a blockbuster Q4 amid the holiday season shopping rush. But last year, Christmas never came to Google:
(Note that the pattern was only disrupted by the sudden onset of the recession in 2008, and even then its broader themes — growth throughout the year followed by a weak Q1 — remained true.)
Although Q4 2011 sequential growth was 9 per cent over Q3 2011; Q3 was 8 per cent over Q2. In other words, Google moved the needle by just a single percentage point. More importantly, Google didn’t get that big Q4 spike in sequential growth that it saw in 2010 and 2009.
That suggests that my boss’s other explanation for Google’s woes — that when people go shopping online they’re increasingly likely to turn directly to Amazon than noodle around on Google first — may be more than just a bunch of anecdotes. Shoppers just didn’t generate the usual spike in ad revenues they did previously.
All of the foregoing explains Google’s sudden interest in newspaper advertising, PR stunts such as the Google+ event with David Beckham, and its continued enthusiasm for Google Wallet (according to svp/advertising Susan D. Wojcicki, who participated on yesterday’s conference call): Google needs to get Christmas back on track in 2012 — and that means reminding consumers to use its products for shopping.