Google’s Quarterly Results
By Norm Johnston, Mindshare
Google had a spectacular fall from grace last week as it lost $22b in market value in one-day; that’s about 1/10th of its overall value of $240b. The loss was mainly due to a 20% fall in year-on-year quarterly profits. Several other factors exacerbated the plunge, including a prematurely released earnings report, Motorola’s continuing losses ($527m), and various data protection and anti-trust threats. Details
However, the primary factor in Google’s disappointing results was a decline in the backbone of their organization: paid search. In fact, charges for click-through on their paid search result ads fell for the fourth consecutive quarter. Average revenue from search clicks has dropped by 15% since last year and shows no signs of stabilizing or rebounding just yet. This decline has occurred despite overall search click volumes going up by 33%. So why the dramatic change in fortune?
The answer is mobile. While it’s almost become cliché to tout the “year of mobile”, Google’s recent calamity provides some substance behind arguably the biggest change the Internet has seen since its commercial inception in 1995. We have indeed reached the mobile tipping point, which is fundamentally altering the media landscape and the ability for media owners to monetize their inventory. In simple terms, while there will be more inventory there will also be fewer advertising units on smaller devices with more sensitive consumers less inclined to be interrupted. Google is not alone in facing this challenge: Facebook, Yahoo, Microsoft, and others are all in the same boat. Implications
- First, do not underestimate mobile. If consumer migration to portable devices is impacting the businesses of advanced, digitally-savvy brands like Google it will most likely impact your brand.
- If click volume is going up by 33% primarily driven by mobile devices, some of those searchers are bound to be looking for your brand. Unfortunately, according to Google, less than a 1/3 of top brands have developed digital assets with mobile in mind.
- Make sure to add on a layer of mobile logic to your paid search activity. What are the possibilities with geo-targeting, of knowing where your customer is physically positioned at that very moment?
- Don’t forget SEO. It still accounts for 60-70% of the clicks on the results page, and with fewer paid ads in a smaller mobile screen it will continue to play a critical role. Just because Google doesn’t promote it doesn’t mean it’s not important.
- Ensure you have an application advertising strategy. If more consumers are using and searching via mobile apps versus the browser, you need to ensure you are considering advertising within applications such as Apple’s iAd and Google’s Mobile networks.
- Mobile dramatically accentuates and reinforces all of the best practice principles many have preached but not necessarily followed on the PC Internet, particularly relevance and invitation rather than reach and interruption. Make sure to revisit your digital best practices!
- Keep an eye out for great new beta opportunities (Google Wallet, etc) in the next months. Google will drive significant new innovations in mobile to bolster their paid search revenues,
If Google and Facebook are grappling with the mobile tipping point, you need to ensure you have a clear mobile strategy and plan. Do not repeat the same mistakes many companies initially made with the Internet by underestimating its impact on consumers and the way they engage with brands. A smart, sensible, proactive approach based on facts will ensure you capitalize on the mobile opportunity to gain competitive advantage.