Reports out of AdGooroo and Covario show that search is still ticking along better than ever. AdGooroo has Google and Microsoft on track for the best Q4 in history. Apparently, despite the gathering storm, people still search and still click on ads. And, relatively speaking, there's been minimal impact on search ad budgets. We saw a lot of advertising budgets hold the course for 2009. This was a good news/bad news scenario. The good news was, budgets weren't cut. The bad news was that planned increases, in some cases aggressive increases, were put on the shelf.
So, are there smiles in Mountain View? Not according to a MediaPost article from yesterday. Google is jettisoning every piece of financial baggage it can, drastically cutting costs to keep the financial boat upright in advance of the earnings report (due out today). The latest cut? Google's newspaper business.
What Does It All Mean?
By any sane analysis, Google is doing very nicely, thank you. Jeffrey Lindsay, an analyst quoted in the MediaPost article, expects to see 23% year over year revenue growth, with 14.3% growth expected for 2009. In the rational world, that would be cause for popping Champagne corks and backs bruised from vigorous patting. Given the performance of every other company on the planet, double-digit growth is nothing short of miraculous. But in Google world, it's an "all-hands-on-deck" disaster. True, Google's stock price has retreated to levels not seen since 2005 (Psst.. stock tip: Buy!), but the financial engine is ticking along very nicely, thank you.
What is happening is a bit of natural selection and forced evolution at the Googleplex, and although this will be painful, it will be very healthy in the long term. Google is picking its winners and culling the losers. At the same time, its strategists are redefining themselves into a sustainable business model. I suspect Eric Schmidt and CFO Patrick Pichette have stolen a page from Rahm Emanuel's book: "Never let a serious crisis go to waste." The economic freefall and irrational pessimism of analysts gives them the opportunity to impose some logical constraint on the overexuberance we saw from Google in days gone past. Google was going to reinvent everything, from advertising to telecommunications to sustainable energy. Now, it appears Google realized there's more than enough in its core mission (organizing the world's information) to keep it busy for the foreseeable future. I always thought that the starry-eyed idealism was commendable but not sustainable. Google is growing up.
Think Search is Strong Now? Just Wait...
In the meantime, think for a moment how search has positioned itself. Despite one of the worst economic years in recent memory, Google showed 23% growth in revenues. During the same time period, every other economic metric went into free-fall. Consumer confidence plunged to its lowest levels ever. Retails sales and online sales both hit the skids. Let's not even talk about home sales. The Dow Jones is down 40% in the past year. The economy didn't just slow down. It screeched to a halt. But in this same time, search kept plugging through without a hiccup. Did the astronomical growth continue? No, but 23% is pretty damn good in anyone's books.
People kept searching and clicking on ads. In fact, according to AdGooroo and Covario, they did so more than ever. The only thing impacting search right now is the sheer fear of advertisers who are being assailed on all fronts.
Understandable? Yes. Rational? No.
So, when we hit bottom and start climbing out of this economic black hole, search will have consolidated its position as the most accountable of marketing channels. It will form the basis of a new marketing model: consumer-driven, immediate, measurable, effective, interactive. And Google will be the most powerful player on the block. Best of all, the company can do it without worrying about selling newspaper ads, redefining America's power grid or colonizing space. All Google has to do is focus on helping people find what they're looking for.
Nicely said Gord - great to see references/sources/links included to back up the piece (all Search Insider columnists should follow your lead).
"Think Search is Strong Now? Just Wait..." I couldn't agree more... however this does not mean Google will win the war, maybe the last few battles but the war, if you ask me, is still undecided.
People forget how quickly this industry changes... in fact the only constant is change. What's coming next is something I think about often.
The social networks are spending a ton of money now pushing their ad models, they have recruited top staff from the SEs and are executing on their marketing plans as we speak.
Facebook, for example, knows more about a "searcher" in just the few minutes it takes to set up a profile than (arguably) Google will ever know. Shouldn't this mean that they could return a much more relevant result?
What happens if Facebook (read MySpace, Hulu,... all Social Netorks) begin to crawl the web, develop their own index (or buy one) and drop a search box on you profile page?!
Just a thought but back to my original point - step changes such as these happen all the time in our industry.
I for one am super-psyched to see the Social Networks spending more and more time at events such as http://www.SearchEngineStrategies.com - their contribution is extremely valuable to our attendees.
"People kept searching and clicking on ads."
Agreed: undeterred searching and clicking means that Google keeps making money (at least in the short term). The real question, however, has nothing to do with searching and clicking: it has to do with buying. If buying behavior is altered radically (and you'd have to be living under a rock not to realize that wallets have snapped shut by the millions across the land due to the evaporation of disposal income), the willingness of marketers to spend as highly as they have in the past will be affected.