Overstock is blaming Google for an "ugly year." Remember when Overstock.com was hit with a Google penalty just over a year ago? Well, the company released its fiscal year and Q4 earnings today, which reflected what CEO Patrick Byrne called "an ugly year". Revenue for the year decreased 3% year-over-year, and 10% year-over-year for the quarter.
Google penalized Overstock in February of 2011 after the site had encouraged sites of colleges and universities to post links to Overstock pages so students could get discounts, though the penalty came after Overstock discontinued the program.
Byrne said at the time, "Google has made clear they believe these links should not factor into their search algorithm. We understand Google’s position and have made the appropriate changes to remain within Google’s guidelines."
In April, the penalty was lifted.
Here's what Overstock said about it in its release today:
"We believe our revenues were adversely impacted during the first and second quarters when Google Inc. notified us that it was penalizing us in natural search results for noncompliance with some of Google’s natural search guidelines. During this penalty period, we dropped significantly in some Google natural search result rankings. We made changes to conform to Google’s guidelines and on April 21, 2011 Google ended its penalization of our natural search results. We were able to offset some of the negative impact to revenue by increasing expenditures in other marketing channels."
Sales and marketing expenses totaled $61.8 million and $61.3 million for the fiscal year 2011 and 2010, respectively, a 1% increase and representing 5.9% and 5.6% of revenue for those respective periods. The increase in sales and marketing expenses as a percent of net revenues is primarily due to increased spending in search marketing, increased in part to offset the negative impact of the Google penalty on revenues as described above, partially offset by a decline in spending for affiliate marketing and television advertising. Sales and marketing expenses totaled $18.9 million and $17.3 million for the fourth quarter of 2011 and 2010, respectively, a 10% increase and representing 6.0% and 4.9% of revenue for the same periods.
They didn't pin the whole thing on Google, but it does go to show how important Google rankings can be to a company's bottom line. I know I don't have to tell some of you who have been hit by the Panda update over the past year about that. Barry Schwartz at Search Engine Roundtable shared another business' story about that just today in fact.
It will be interesting to see the effects a penalty has had on Google's own Chrome operating system once the penalty is lifted. It seems, so far, that it has indeed had some impact.