In what is perhaps the most unusual market move since the 1987 market crash, the Dow soared and Google got smashed–with the stock ending down 6%. What gives?
Earlier, we suggested that the market is finally waking up to the fact that Google will not be immune to a recession. At 40X run-rate cash flow, this is not a cheap stock, so any concerns about the growth rate lead straight to multiple compression.
We reported a worrisome data point to this effect last week, when a prominent search engine marketing firm said it saw a sharp falloff in search spending at the end of December. In the past few days, we’ve also reported bizarre data in the December search-share numbers: Nielsen and Comscore both show modest Google declines. These should be unrelated to economic weakness and they’re probably just noise, but they can’t be spun as good news.
And just this evening, Citi analyst Mark Mahaney finds more Comscore data to fret about: U.S. paid clicks:
comScore just released its estimate for Google’s U.S. Paid Click growth for Q4 — 8% Q/Q, which marks a surprising deceleration from the 11% Q/Q growth that comScore reported in Q3. Our and Street estimates assume an acceleration in Google’s Worldwide Paid Click Q/Q growth for Q4, a quarter of seasonally strong paid click volume.
The comparison here isn’t apples-to-apples. But GOOG reported a 5% Q/Q increase in Worldwide Paid Clicks in Q3 vs. comScore’s 11% U.S. growth, and we are assuming 20% for Q4. In Q4:06, Google reported 22% Q/Q growth, after an estimated 6% Q/Q growth in Q3:06.
Bottom line: Last year, Google’s paid-click growth accelerated significantly from Q3 to Q4. And now ComScore is reporting that, this year, at least US paid-click growth decelerated.
Don’t want to read too much into anecdotes and noisy data points, but as Mark observes, they’re all negative.
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