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Jefferies on Monday raised its price target on Google Inc to $465 from $442, ahead of the release of the Internet company's second-quarter results. The firm cited the company's resilience in paid clicks and ability to lower traffic acquisition costs in its decision
stock analysts sometimes get access to key employees within a corporation, where they can get inside information. The quote above makes me think that Google might be keeping a larger percentage of ad revenue from their publishers.
Link to Yahoo News Item [uk.biz.yahoo.com]
[edited by: martinibuster at 4:37 pm (utc) on July 13, 2009]
[edit reason] Added link. [/edit]
hasn't generated much discussion (it seems only three people have acknowledged receiving the notification) but it might confirm some of what your posting suggests.
the quote above, however, seems to indicate that google is keeping a larger share of payouts from all or most publishers thereby increasing its own profits.
we should get some indication of this by reviewing the TAC (traffic acquisition costs) specified in the press release that will come out this thursday (16 july) at their quarterly earnings conference call.
The firm cited the company's resilience in paid clicks and ability to lower traffic acquisition costs in its decision
The quote above makes me think that Google might be keeping a larger percentage of ad revenue from their publishers.
That's not the first thing that came to mind when I read the quote.
There are other ways that they can reduce TAC, without reducing the percentage that they pay out. If a site has an extremely low CTR, getting rid of it will reduce their ad serving costs in relation to their revenue generation. Like someone else mentioned, getting rid of the sweetheart deals where they pay all revenue to the site would also significantly reduce their TAC without negatively affecting average publishers.
if i recall correctly, google has consistently said that the savings generated by smartpricing are completely passed onto the advertiser... in other words, that google itself does not make more profit from smartpriced publishers.
It is likely that Google doesn't keep any of the proceeds of Smartpricing and does pass on the full amount of the discount to the advertiser.
I believe however that Google increases it's profits indirectly via Smartpricing by attracting a large volume of low-ballers who would otherwise not use the Content Network.
Within the bigger picture, individual publishers suffer a reduction in income whilst Google attracts more low-ball advertisers across the greater network.
From the AdWords site:
...In fact, we've found that in many cases smart pricing enables our advertisers to achieve a lower cost-per-conversion on content as compared to search...
The fact that Google' s stock is up 60% during the world's worst depression since 1929 is only a coincidence. The fact that my earnings are down 60% since the same period is due to the crisis.
Nothing to see here. Keep moving.
Here is a full article with more TAC details [online.barrons.com], published on Barrons website.
A renegotiated MySpace deal should improve TAC [traffic-acquisition costs] in fiscal 2010. Google has ample leverage to renegotiate a profitable deal with [MySpace owner] News Corp (NWSa) prior to the deal expiration in June 2010 given the:
1) difficulty in monetizing MySpace traffic;
2) declining usage of the service; and
3) Google's increased reliance on O&O traffic to drive a higher portion of revenue (from about 63% in first-quarter 2007 to about 69% in first-quarter 2009) versus network.
This report has more detail from the company responsible for the quoted snippet in this discussion.
[edited by: martinibuster at 4:55 am (utc) on July 15, 2009]
1) Google's reducing payouts to AdSense publishers, and not just the big ones like MySpace (those are fixed multiyear deals);
2) Google's ability to brand 'Ads by Google' is driving increased brand awareness such that, over time, visitors to y'all's sites move more and more of their viewing activity over to Google's own properties.
But okay, using the lowest price during the last 52 weeks to today- yes, that's a nice gain. (We could just as easily use the highest point during that period and lament at how much Google has "tanked" since then.)
Considering the overall markets during that time, it sounds to me like Google is smarter/better than 99% of the rest of the world.
what is "O&O traffic"?
Here is what it says in the article:
Our proprietary analysis suggests paid clicks for domestic O&O [owned and operated by Google] sites grew at 20%-25% year-over-year in May/April.
They (Barron's)seem to have their own agenda...Barron's is not behind the story, they are reporting on an analysis done by a company called Jeffries.
If Google's earnings this quarter will be better than expected only due to a contract re-negotiation, shouldn't every AdSense or even Adwords users feel some worry about that on some level?
That's an interesting question. I'm not sure what you mean by worrying, might want to make it explicit what it is to worry about. However the article makes it clear it's not only from the renegotiation. According to the analysis they don't get into what partner trends are, just Google's owned and operated sites. They note that Google is earning more from their own sites than previous, from 63% to 69%. The study also finds a bright spot in that pricing trends have not deteriorated, although they haven't improved either, except in a few verticals, particularly in the UK.
The other notable comment is they expect merchants to move away from affiliates and spend more on PPC because of states making moves to tax affiliate work. That's debatable but would be good for some publishers with the appropriate content if merchants decide to manage PPC directly on publisher sites rather than pay affiliate commissions.
I'm not sure what you mean by worrying, might want to make it explicit what it is to worry about
Why worry? The only certainty I know about this is no matter how Google may be able reduce TAC, neither I nor anyone else here, can do a damn thing about it if it's at our possible expense. If dissatisfied, seek alternatives.
Traffic Acquisition Costs, the portion of revenues shared with Google’s partners, decreased to $1.45 billion in the second quarter of 2009, compared to TAC of $1.47 billion in the second quarter of 2008. TAC as a percentage of advertising revenues was 27% in the second quarter of 2009, compared to 28% in the second quarter of 2008.