Google, Microsoft, Stall Points, and Growth

Re:Google, Microsoft, Stall Points, and Growth by ChuckMcM on Tuesday April 14, 2015 @06:35PM (#9377786)

It is an interesting analysis. I've followed Google's numbers pretty closely since I left in 2010 to track trends from the outside that had started becoming apparent on the inside. Basically there is a limit on how "good" you can be at search advertising, and other companies are relentlessly investing there and so as Microsoft, for example, has quarters of growing ad value both in CPC and volume. Google has declining CPC and growing paid distribution costs. It is often hard to hold a technological edge without moving the bar forward, and while Google was way out ahead before, now they get fewer and fewer gains with the investments they do. That squeezes margins and that results in focus (good) and conservative management (not so good).

What is really spot on in the article is that when the 'luster' of being a growth company comes off, the stock feels it disproportionately. And as RSUs are the retention package of choice your "retention bonus" gets smaller as the stock takes a hit. That unlocks hand cuffs and people who are smart and aggressive opt to try something with more risk and a better potential reward.

It really is true that nothing is forever, but I know there is always the tendency to operate as if it is. Looking forward to the next wave.

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Re:Google, Microsoft, Stall Points, and Growth by skj on Tuesday April 14, 2015 @07:46PM (#9378056)

> Google has declining CPC ... now they get fewer and fewer gains with the investments they do.

Keep in mind that the declining CPC is coupled with increased revenue, caused by the amount of ad inventory they're moving. So, your second statement is not supported by your first.

(disclaimer: googler, but not in ads or anything related)

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Re:Google, Microsoft, Stall Points, and Growth by ChuckMcM on Wednesday April 15, 2015 @09:22AM (#9380760)

That is correct, revenue is increasing, but that increase is coming through increases in ad inventory on the core sites, and paying for more traffic (aka Paid Distribution) as more and more people don't bother to switch off 'bing' or 'yahoo'[1] on two big platforms (Windows and Firefox).

There is a limit on how much traffic you can buy, there is a limit on how many ads you can put on your pages before those ads push people away. And when those work arounds lose their effectiveness (my guess is Q3/Q4 2016) then revenue will be flat year/year. If people decide that Google isn't a "Growth" stock, they will reprice their value based on current revenues rather than projected revenues, and call for the elimination of everything that cuts into profits. As the original article points out, there are many previous examples.

[1] Currently also Bing :-) but will no doubt change when the agreement expires.

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Re:Google, Microsoft, Stall Points, and Growth by nrao123 on Tuesday April 14, 2015 @08:49PM (#9378270)

Google's revenue formula is: CTR x CPC x # of Searches. If number of searches & CPCs are under pressure then they will continue to tinker with CTRs by changing ad formats & screwing with the user experience:

https://cgviews.wordpress.com/2014/10/22/google-changing-ad-...

https://cgviews.wordpress.com/2014/10/14/changing-google-ad-...

https://cgviews.wordpress.com/2014/01/15/google-ad-changing-...

https://cgviews.wordpress.com/2014/01/15/googles-changing-ad...

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Re:Google, Microsoft, Stall Points, and Growth by ChuckMcM on Wednesday April 15, 2015 @09:26AM (#9380783)

Agreed, but the formula is more like (CTR x CPC x # Searches) - Paid Distribution. And "yield optimization" (which is code for increasing CTR) is all about tricking the clicks.

The two negative forces this employs then is that if they bump their CTR and yet people who click don't buy, this further depresses CTRs as advertiser value the clicks less and less. And by paying to send them search traffic that money is paid if you search for "new car insurance" (very valuable) or "Pythagoras theorem" (basically worthless).

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