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  • bo_rare bo_rare Feb 13, 2005 2:14 PM Flag

    open your eyes !

    Do Not Buy the Google Hype
    While earnings came in ahead of expectations at "the GOOG," Google's achieved growth with one-time gains that will never materialize again.

    hotjerky [VC] | POSTED: 02.01.05 @20:07
    The story of Google's earnings have made their way through the internet like a widefire since its announcement earlier today. Unfortunately, Google's growth was driven by business optimization that are largely on-time gains.

    1) Google grew earnings via AdSense which is now close to half of its revenues.
    AdSense has the highest click fraud rate of any CPC product. In fact, many marketers refuse to use contextual advertising because of publishers clicking on their own ads which leads to low ROI.

    2) Google grew earnings via Adware
    Adware is like crack. The first hit is always free and gives the user a nice short term boost to polish up earnings. Unfortunately, Google turns a blind eye to distributors and and resellers who resell Adsense feeds. Ever see Adwords mysteriously popup on your computer in a separate window? Now you know why.

    3) Google's growth came from non-repeatable acquisitions
    Google's most significant acquisition to date has been Blogger because it brough on several hundred million page views per month to its service. Google's traffic growth is actually flat. The growth that Eric and George spoke about was due to Blogger.

    4) Growth in margins was due to large renegotiations of revenue share contracts
    Google's most significant partner is AOL. Renegotiation on that deal took time and the improvement in margins from it are largely one-time. There are no more AOL type contracts to renegotitate.

    And that is skinny on the Google quarter. I expect long term growth rate to be 30% per year vs the 50%+ growth rate that analysts are citing. Do not buy the Google hype.

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    • everyone needs to read this post.

      NW

    • I reposting this over to the Raging Bull now bringing it back.

      FROM yAHOO MESSAGE BOARD

      EARNINGS DIDN'T GROW SEQUENTIALLY!
      by: profit_of_babble_on (M/Vancouver,Canada) 02/06/05 03:42 am
      Msg: 120772 of 120944

      Pardon the caps lock but that is a headling worth screaming about.

      You need to look at the numbers.

      In Q3 GOOG had net income of 51 million dollars. There actually was a huge debate on this board about the significance of that number. Because GOOG had to make a one time payment of 201 million to Yahoo in the quarter, longs argued that their actual earnings for the quarter was actually 252 million in total seeing how the payment was not likely to repeat. The shorts were willing to give them the benefit of the doubt

      Here is the dilemma:

      If GOOG earned a 252 million net income last quarter then their sequential earnings actually dropped! Their earnings didn't grow quarter over quarter.

      GOOG's EARNINGS DROPPED BY 19% SEQUENTIALLY!

      Not only that but they dropped through the supposedly busiest season of the year for net firms.

      BUT WAIT!

      IT ACTUALLY GETS WORSE!

      If you look at GOOG's net profit margin for Q3 they managed to get $252 million in earnings from $805 million in total revenue for a bottom line profit margin of 31.3%. That is quite respectable.

      Now look at Q4. They had net income of $204 million in earnings with a total revenue of 1,032 million. That only gives them a bottom line profit margin of 19.7%

      NOT ONLY DID THEIR EARNINGS SHRINK BY 19% SEQUENTIALLY BUT THEIR PROFIT MARGIN SHRUNK BY 37% SEQUENTIALLY.

      THAT IS NEWS!

      GOOG has already stopped growing on a quarter by quarter basis! This didn't happen last year. Last year GOOG's earnings grew by 35% Q4 over Q3

      Pardon my 'screaming' in this post but this was NOT told to us by the media OR GOOG. No wonder employees are selling their shares.

      GOOG is a great company.....just not at this price

 
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