Will Google Survive the Downturn?
January 22, 2009 1:58 pm
The earnings stampede continues. Last night, Apple’s (AAPL) news of higher than expected numbers seemed to be a temporary relief to what was gearing up to be an ugly season. Early on in today’s session, Google (GOOG) was riding on the coat tails of the initial market move higher from the overnight excitement surrounding the Apple announcement. Even with the massive downturn we are seeing today (which has erased most of yesterday’s gains), there remains a hopeful outlook for the Tech sector. With Google reporting after the close today, we will get further insight into the potential for this sector’s strength.
What we know is that Google has made giant strides in increasing its market share beyond search. With the global slowdown staring us right in the face though, what we need to know is how that will effect earnings since the majority of Google’s earnings is based primarily on advertising revenue. . A major portion of their revenue stream is created from consumers clicking ads they have posted on their search engine. While Google has established its dominance in the field of search (see table below) the fact still remains that they need to attract people to actually click their ads.
During these times of economic crisis the argument can be made that people are less willing to purchase goods. However, it is possible that consumers are placing more value on becoming price conscious and continuing to shop. This would then create the possibility of an increase in Google’s per click ad revenue as consumers search for the best deal.
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