Google+ is proving to be a big public relations boon and stock stepping stone for the search engine, which reports second quarter earnings after the bell July 14.
The
Google+ social network has generated a tremendous
amount of buzz, as Google (NASDAQ:GOOG) gets ready to bid adieu to the second
quarter with its earnings report July 14 after the bell.
Investors polled by Thomson Reuters expect the search engine
to report net revenue of $6.54 billion, which is up 28 percent from the prior
year.
The period marks the first in which Google CEO Larry Page
took the reigns from Eric Schmidt.
More interesting will be the tenor of the earnings call with
financial analysts, who are bound to pepper Google's management with questions
about how the search company will make money from Google +, as well as how the
investigation by the Federal Trade Commission of Google's search-ad practices
is impacting the company.
Until late last month, the big news would have focused on
concerns about the FTC antitrust inquiry, but then came June 28 and the limited-beta
launch of Google+, the company's bid to challenge Facebook's social networking
crown. Since then, the
company's shares have increased some 9 percent, closing
Monday at $527.28.
Google+ isn't contributing anything to the company's bottom
line yet, but the social network is off to solid start.
Ancestry.com founder Paul Allen estimated that
the number of Google+ users is already at about 10 million and could hit 20
million by this weekend.
Global Equities Research analyst Trip Chowdry said Google's
Circles social graph builder (which lets users place contacts into several
buckets), the Sparks topics feed, and the Hangouts video-chat service
"significantly improve the usability, monetizability and user control in
Google+."
Said Chowdry: "That Facebook has become -too cluttered
over time' was a common complaint we heard."
Chowdry also noted that in response to the Facebook clutter,
developers have created several applications to help users move their Facebook
content to Google+. Move2Picasa, for example, lets users migrate their Facebook
photos to Google+, which is linked to Picasa.
On the strength of Google+, Chowdry said he is ratcheting up
his fiscal year 2012 estimates, boosting revenues, excluding traffic-acquisition
costs, from $31 billion to $34 billion, and raising earnings per share from $37
to $42. He is maintaining his current fiscal year 2011 estimates of $27.38
billion with an EPS of $33.52.
Not every equity analyst is so sanguine about Google+,
particularly when it isn't impacting Google's bottom line for Q2.
Gleacher & Co.'s Yun Kim said that the Google+ service,
the company's Android and Chrome businesses, and its push into local
advertising (Google Places, Boost) could require a higher level of investment
that could weigh heavily on Google's cost structure.
"With GOOG's recent realignment of business segments to
refocus its efforts on strategic areas, we believe the company continues to
carry a high level of risk associated with both the timing and the amount of
investment needed to fuel its growth strategy going forward," Kim wrote in
a research note July 12.
Google's biggest long-term risk is the uncertainty regarding increasing
regulatory scrutiny, but with regard to its acquisition plans and its search ad
business.
The FTC's scrutiny could take a year to bear fruit, if there
is any fruit to bear at all.
Also unclear is what will become of
Android regarding Google's suit versus Oracle,
which is suing the search engine for infringing on Java technology used in the
open source operating system.
In the meantime, most pundits and analysts will watch
Google+' impact on Facebook's user engagement in earnest.
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