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This huge disparity between the growth rates of Google sites and partner sites is without precedent for most of its history. For example, in 2010, Google sites never exceeded the growth rate of partner sites:
- In Q1 Google sites grew 20% and partner sites grew 24%
- In Q2 Google sites grew 23% and partner sites grew 23%
- In Q3 Google sites grew 22% and partner sites grew 22%
- In Q4 Google sites grew 22% and partner sites grew 24%
Yet in Q1 2011 Google sites' growth jumped suddenly and without any explanation: Google sites grew 32% and partner sites grew 19%. For some strange reason no one has picked up on this or noticed this huge change in its business model.
What the last two earnings calls show is that Google is willing to accept an impact in our revenue to improve our search quality. So it was a helpful exercise for me to track down the relevant bits from the earnings transcripts.
The relevant sentence is "Network revenue was again negatively impacted by the Search quality improvements made during the latter part of Q1, as you will remember, and know that Q2 reflects a full quarter of this impact."
Now go read Google's Q1 earning's transcript at [seekingalpha.com...] . The relevant section is "The Google Network revenue was up 19% year-over-year to $2.4 billion. That Network revenue was negatively impacted by two things, the loss of a Search distribution partnership deal and also, what has been broadly communicated, by Search quality improvement made during the quarter. Regarding the Search quality improvement, remember that we regularly make such trade-offs. We really believe that the quality improvements that benefit the user always serves us well both in the short term and in the mid term in terms of revenue."
The Mountain View, Calif., search giant's second-quarter net income jumped 36% from a year ago on revenue that was up 32%.[usatoday.com...]
Google shares (GOOG) rose $66.79, or 12.6%, to $596 in after-hours trading on the news, released after the close of regular trading.