Google Q2 Call CliffsNotes
Maybe Google Co-founder Larry Page should skip quarterly earnings conference calls more often.
Nothing earth-shattering came out of yesterday's call with financial analysts, where Google reported a 35 percent profit hike that left investors displeased.
However, between co-founder Sergey Brin, CEO Eric Schmidt and Page stand-in Google Chief Economist Hal Varian, there were a number of interesting nuggets to glean. Here's the CliffsNotes version of the hour-long call.
On Google's decreased ad coverage:
In a word, oops. Easily the most candid and interesting morsel from Brin or any Googler's mouth was the admission that perhaps Google was a tad too zealous in sacrificing ad quantities for more targeted ads. Brin said:
There is some evidence that Google has been a little too aggressive in decreasing ad coverage than we ought to have been. Historically, we've had this kind of 50-50 rough notion that when we have an improvement in ad targeting, we try to reduce our coverage at the same time as improving our monetization. Clearly, that's not the ideal strategy, definitely, because we don't want to end up with no ads. In fact, from a quality point of view... we now find our ads are a significant addition quality wise to our page. So we've actually been examining some of that.
He means rethinking how many ads per page Google is going to show going forward. My guess is Google's aggressive ad coverage, or lack thereof, dinged its paid click rate, which dipped 1 percent from Q1. It certainly contributed to the profit shortfall.
On mobile search:
Brin extolled the virtues of mobile search and related advertising efforts. Here's a shocker (not): Mobile search has been growing quite a bit thanks to Google's placement on phones made by NTT Docomo in Japan, where he said there is a robust advertising market for mobile search.
"We are certainly optimistic that many of these advances, which may initiate in Japan, will carry over in the rest of the world as the devices and culture catch up."
What about the iPhone in the wake of the new 3G version launched last Friday to worldwide acclaim? Brin said the iPhone boasts greater instances of search per device than other devices, and speculated that 30x searches are done on an iPhone compared to a conventional cell phone.
"As you see more iPhones out there, as you see other phones that start to have capable browsers and input methods, I think you're going to see tremendous growth there."
Little was said about Android, which you would think would be a big issue with the success of the iPhone 3G, but the execs reiterated second half of this year as the first Android phone date and pointed to a few cool Android Apps that came through the Android Developer Challenge.
Of course, no mention was made about Google's horrible faux pas in discriminately handing out new Android SDKs to Developer Challenge winners. Moreover, when Schmidt thought Brin was rambling about Android a bit much, he cut him off and asked for the next question. Very shrewd.
On Google Apps:
In short, Brin said they rock. More than 500,000 businesses are now using Google Apps, including Gmail, Calendar, Docs and Sites, daily.
No word on how many of these are paying for the premier edition, but Google charges so little for it anyway that when you stack it up versus the company's robust ad model, how many are paying for it is probably not the big issue yet.
Anyway, Washington D.C. now has 38,000 government workers on Google Apps. G.E. is using the security side of Apps products, which was formerly Postini, covering 300,000 users.
On YouTube and DoubleClick:
Brin said YouTube now boasts more than 13 hours of video uploaded per minute, while Schmidt said the perfect ad product for YouTube has not been invented yet even though the current favorite "in-video" model seems to be working well. Note to aspiring video ad programmers: if you can come up with a killer app, Google will pay handsomely for it.
Google believes in the course of integrating DoubleClick that it will come up with a fine display ad to serve YouTube. Also, Schmidt said Google's goal with DoubleClick is to enable advertisers to advertise across all of the different-sized publishers with one mechanism. "We feel that it will be fairly soon, in a matter of months."
So, how exactly is Google well positioned for an economic downturn, analysts wanted to know? Varian had the most concise summation for the company:
As times get a little uncertain, consumers are going to shop more carefully to make every dollar count, and that means they are going to be doing research online and doing shopping online, so I think we have a little bit of the Wal-Mart effect going on...
Schmidt added that Google's only concern is where people stop searching, which means, duh, that these people aren't seeing ads to click on.
That may be oversimplifying things a bit. With all of the moving parts and integrations, it's clear some of those units are going to lose the company money. It's inevitable.
Fortunately, Google seems to have quite the paid search model to keep it firing on all cylinders even through a recession.