Advertisers and marketers are
watching Google closely for an ad recovery. And analysts and investors are once again eyeing signs of a $600 stock price. Executives at the Mountain View, Calif. company seem somewhat chipper lately
as they prepare to report September quarterly earnings Thursday.
Emphasizing that the worst is over and that things are looking up, Google CEO Eric Schmidt told reporters at a New York City
press conference this week: "We are clearly seeing aspects of recovery, and what is notable is that we're seeing aspects of recovery not just in the United States but in Europe."
Efficient
Frontier, which supports large brands with search engine marketing, believes Google's year-on-year ad revenue will decline slightly, but rise sequentially, according to Justin Merickel, vice president
of marketing and new product development for the marketing company. "There are a lot of signs that search marketing is picking up," he says. "I think that puts a favorable view on the quarter for
Google."
Wall Street analysts, for the most part, believe Google will modestly beat consensus expectations. Soleil Securities Analyst Laura Martin expects Google to report third-quarter net
revenue of $4.3 billion, up 6% from the year-ago quarter, and 2% below the prior estimate. Martin estimates that Web ads will bring in $3.86 billion -- up 5% from the prior year, and 1% below the
previous estimate of $3.9 billion. The network Web site ads should garner $1.7 billion -- up 3% from the prior year.
Stanford C. Bernstein Analyst Jeffrey Lindsay in a research note writes that
net revenue estimates of $4.35 billion represent 7.6% year-on-year growth -- up 6.9% sequentially, versus consensus of $4.21 billion -- up 4.1% and 3.4%, sequentially. He writes that this would
represent an improvement from the disappointing 4.5% net revenue growth in the second quarter.
Lindsay points to Google's ability to maintain a lead in paid search. The company's share of core
search has remained stable at 65% in the U.S. and 67% globally since May, despite Microsoft's launch of Bing in June. In China, however, Google takes a backseat to Baidu, with roughly 30% share.
Expect CPCs to decline by 4.0% on a FX-neutral basis, as bidding on keywords likely remained weak due to a still sluggish economy, according to the report. It goes on to explain that the long-term CPC
trends should continue to improve with the overall economy, as keyword bidding essentially takes place on a real-time basis.
When Yahoo reports earnings the following Tuesday, Lindsay writes that
the company will likely have a "messy quarter," driven by difficulties in search and display advertising. Operating margins will fall under pressure as the company's expense run-rate rises by $75
million to increase headcount and boost marketing expenses, in part, for the $100 million global It's Y!ou advertising campaign unveiled in September. Lindsay forecasts Yahoo's search revenue to fall
13% for the quarter, with the U.S. declining 11% and International dropping 23%.
A recovery in display advertising will likely lag one in paid search, given the reliance on professional sales
staff and negotiated contracts, Lindsay writes.