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Google Economics: Bad Quarter Hid Good News

So earnings were off, revenue still rose

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The usual and customary reaction to missing earnings predictions got under way after Google’s reported 11 cents less than what analysts expected. Google explained why they should relax.

The stock market reacts almost predictably to news of a company failing to meet the predictions of stock analysts. Come in under as much as a penny, and investors turn on the stock like it made a gassy sound in a crowded elevator.

Such is true with Google, which reported earnings of $4.63 per share for Q2 2008. Not bad, except traders expected $4.74. Punishment was meted out swiftly in after hours trading. At 7:32 am ET, Google’s shares had fallen from a previous close of $533.44 all the way down to $496, a drop of seven percent.

They likely didn’t listen, or choose to listen, to Google’s chief economic spinmeister, Hal Varian, on the conference call. As Techland noted, Varian indicated a couple of reasons why the Googleplex isn’t going to be auctioned off anytime soon.

It seems that in the process of building an excellent search engine and an absolute money printing advertising business, Google became a bulwark against adverse economic forces. “As times get a little uncertain, price sensitive consumers spend more time searching for deals. We have a bit of the Wal-Mart effect,” Varian said.

Meaning, in Varian’s thinking, Google possesses a little recession resistance in ways that competing companies do not. He also noted that outside of real estate, all of the sectors of paid search experienced revenue growth in the quarter.

Varian argues this is due to the accountability of paid search, and we readily agree that helps. But Google’s dominant position in online advertising, much like the Wal-Mart Varian name-checked in retail, is the real reason why the money keeps on coming.

Google Economics: Bad Quarter Hid Good News
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  • http://www.thepoddrop.com iPod Repair guy

    Like you said reveues were still up.  What other business in this economy can still grown revenues like that.

  • http://egd3llulu.mam9.com ??? ??????

    ??? ?????? ,,?? ????????? ?????? ??? ??? ??????? ??? ??????

    • Guest

      Arabic Translation:

      "Particularly for girls, each Freddie only to find forums held pearls"

  • http://www.foursquareinnovations.co.uk/ Chris

    I guess we should all be looking for business models and markets that thrive in a harsh economic climate right now.

  • Bill

    Maybe it’s time for investors to go back and start looking at all of the fundamental metrics of a company and quit relying solely on financial analysts projections for EPS.  I realize this takes a bit of work on the investors part but do you really want to rely solely on an MBA grad with 5 years of experience in order to make your investment decisions?

    All investors should follow at least the basic metrics of any company in which they invest:

    Revenue Growth

    Market Share Growth

    Expenses, including R&D for companies like Google, and when that R&D is expected to pay off

    All of the above compared to the company’s industry as well as compared to other investment options will give a much more complete picture to investors vs. just following the herd lead by an analyst or two.

     

  • http://lowongan-pekerjaanterbaru.blogspot.com/ lowongan

    It’s good to see revenue still up