Commentary

Google News Blowback Could Be Bad News For Google

Google News

A disconnect between Google and users could push advertising budgets toward paid search ads on Bing and Yahoo search by the end of this year. The Mountain View, Calif., search engine redesigned its News page, but it appears some aren't happy with the new look. MediaPost first sited and reported the changes in May, but Google began rolling out the update in July.

Apparently, Marissa Mayer, Google's vice president of search product and user experience, must feel confident the combined Bing and Yahoo relationship won't become a threat. It's also unknown if she has read some of the comments on the Google News forum. Search traffic from the combined MicroHoo will become the deciding factor, as marketing experts contemplate moving budgets to another engine. In light of comments like "I hope you lose all of your ad revenue because of this" on the Google News help forum in response to the change, the switch for some cannot be far behind.

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Aside from Google News-bashing comments, if there's any indication the search engine has some rethinking to do we might find it in data pulled from Experian Hitwise. The data firm estimates that on July 1, 2010 search traffic on news.google.com in the United States declined 2%, compared with the same day in the prior week, though Google News continued to average .11% of the search traffic share. Search traffic on the news site also declined 2% on July 2, and 4% on July 3, compared with the same day in the prior week, but increased 8% on July 4.

On average, Experian Hitwise notes a 1% drop in search traffic on news.google.com in the U.S. during the week of June 20, compared with the prior week. It's too early to tell if the redesign or the U.S. holiday, Independence Day, influenced the decline.

Analysts have not caught on to consumer sentiment. While the second quarter typically represents a down month for search engines, J.P. Morgan Analyst Iman Khan decided to tweak revenue estimates. In an analyst research note published Wednesday, he points to changes in the firm's assumed FX rate, hedging impacts, and the elimination of Nexus phone sales. He revised 2Q revenue and EPS estimates of $4.92 billion and $6.38 vs. our prior estimates of $5.07 billion and $6.61.

The firm also reduced the stock price target to $566 from $639 given the lowered estimates. Khan thinks the second quarter 2010 domestic gross revenue will come in at about $30 million less than the prior quarter. "Based on search channel checks and our expectation for strong 2Q display performance, we expect domestic revenue excluding the phones to grow 2.3% sequentially," he wrote. "On a Y/Y basis, this translates into 24% growth vs. 1Q growth of 22%."

Google releases Q2 earnings on July 15. Yahoo will release Q2 earnings on July 20.

1 comment about "Google News Blowback Could Be Bad News For Google".
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  1. Nettie Hartsock from The Hartsock Agency, July 7, 2010 at 4:38 p.m.

    I really hate the way the redesigned the news page. It's not as user-friendly as what they had before and it's harder to interpret the results. It reminds me of when Coke rolled out "new" Coke and it was a complete debacle because users loved the old Coke!

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