Don't let anybody kid you into thinking that Google
The average cost for an advertiser to receive a lead through Google fell by a sharp 13% in the second quarter, relative to what sponsors were willing to pay a year ago. The upside here is that Google was able to deliver 15% more clicks than it did a year ago.
Net revenue, after subtracting traffic acquisition costs from gross revenue, rose by 4% to $4.06 billion. This is the second straight quarter of sequential declines in net revenue for Big G.
Things look better on the bottom line, though, as Google's margin-widening ways have non-GAAP earnings climbing by 16% to $5.36 a share. Analysts were banking on a profit of just $5.09 a share.
Beyond the sequential top-line dip and the plunge in click costs, the only other problematic nugget in the report rests in the amount that Google is paying its AdSense members.
Third-party publishers generated $1.68 billion in gross revenue for Google, as a result of syndicating the search giant's contextual marketing ads across their sites, blogs, and YouTube clips. Google paid them $1.24 billion for their efforts, or nearly 74% of the gross revenue that AdSense publishers delivered to Google. That's a generous figure, sure, but the payouts have been higher -- between 75% and 79% -- in the past.
Holding back will fatten Google's coffers, but it also risks alienating Google's publishers.
Not that Google has to worry about that right now. There isn't anything close to AdSense in monetizing sites that thrive from targeted text ads, largely because Google is the Internet's largest advertiser. Yahoo!
Watch out for Microsoft
This doesn't mean Google investors should be quivering with fears of vulnerability. Google remains the top dog, and paid search is clearly holding up better than the display-advertising strongholds that define Yahoo! and ValueClick
Google isn't the speedster it used to be, though. It's not growing as quickly as market leader Baidu
Google is still the class of online advertising, but it has some homework to do.
Read up on Google:
- Google had a decent quarter in April.
- It snapped up GrandCentral.com in July of 2007.
- I can make you rich in 3 years.