Google Announced Q4 Earnings; Getting Back to its Fighting Weight

Friday, January 23rd, 2009 by Andy Beal

Google Announced Q4 Earnings; Getting Back to its Fighting Weight

Google has released its Q4 numbers–beating Wall Street expectations–and in the process has admitted that it can no longer continue to milk its fat search engine cow.

First, the boring stuff numbers:

Google reported revenues of $5.70 billion in Q4, representing an 18% increase over Q4 2007 revenues of $4.83 billion and a 3% increase over Q3 2008 revenues of $5.54 billion.
Google’s net income fell sharply to $382 million, or $1.21 a share, from $1.2 billion, or $3.79 a share, in the same period a year earlier.
It it weren’t for writing down the value of its AOL and Clearwire investments by $726M and $355M respectively, Google would have seen net income of $1.62 billion–or 15 cents higher than the $4.95 per share expected by analysts.

So, considering the recession, the above numbers overall paint a positive picture. Except that Google CEO Eric Schmidt has warned that the company might face tougher hurdles in Q1 of this year:

“In some ways, the fourth quarter was the easy part,” Schmidt said. Then, the economy was in “uncharted territory. Now it’s clear we’re in recession. We don’t know how long this period will last. We’re certainly prepared to get through this (with) no problem.”

Now for the good stuff. I’m not going to do too much segment analysis, but I do want to point out one key observation. Google finally has a reason to be competitive and improve its products–and it’s not Yahoo or Microsoft, but the U.S. recession!

I don’t know about you, but for the last couple of years it’s felt as though Google is more interested in spreading itself wide (and thin)–in an effort to be more than a one-trick pony–than innovate in search. With no credible threat from any other challenger, we were left using a search engine that, apart from some cosmetic changes, didn’t really feel like it had changed much since around 2000.

As the recession crept up on us, Google reacted by announcing new innovations in search, a focus on its core products, and shuttering anything that was a distraction. To draw an analogy from the boxing world, Google is getting back to its fighting weight!

So, in the end, Google’s attempts to be more than a one-trick pony were somewhat futile. Just as I can make a living from internet marketing, but would starve if I tried to monetize my photography skills, so too Google is realizing that sometimes it’s OK to only have one trick–just make sure that it’s the best damn trick around!

PS. OK, I lied a little about doing segment analysis. Here’s what struck me from the numbers:

The amount of money that Google makes from its own sites increased by 22% from a year ago.
30% of its revenues came from AdSense, but this segment only grew by 4% in the past year.
Revenue from paid clicks increased by 18% from a year ago and 10% from last quarter.
The amount Google spends in Traffic Acquisition Costs (AdSense payments) decreased by 1%.
If I’m reading it right, Google plans to allow employees to exchange any stock options currently under-water, with those that have a exercise price closer to today’s stock value. Which would help with employee retention.

(Analysis compiled from here, here, and here.)

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11 comments on “Google Announced Q4 Earnings; Getting Back to its Fighting Weight”

Dan London Says:

January 23rd, 2009 at 10:30 am

“$5.70 billion in Q4″

That is a pretty amazing number.

Have any data on what was spent on Print advertising in general in Q4?

Dan London’s last blog post..The Old Media Blues
Milo Says:

January 23rd, 2009 at 11:59 am

Google are now paying less in AdSense? Is that lower rates or just people getting less hits…

Also, the photoshopped boxing gloves image is terrible
Dan London Says:

January 23rd, 2009 at 12:42 pm

I find the ROAS is lower on the content network, so I use it less. Probably a decline since more and more advertisers are going straight search.
Jayson Says:

January 23rd, 2009 at 1:53 pm

Those numbers are pretty impressive. I thought for sure Google would take a hit, but all things considered, the company is a Rockstar. Getting back to it’s fighting weight is exactly what needs to be done, now isn’t the time to venture off into the unknown.

Jayson’s last blog post..Modify Mortgages Now Program | Fix Housing
Andy Beal Says:

January 23rd, 2009 at 2:25 pm

@Dan – not seeing the breakdown, but I’m sure it’s in the filing…if you’re brave enough to hunt for it!

@Milo – the original image was just as bad! http://tbn3.google.com/images?q=tbn:McBnsZ1CjIBGsM:http://www.robbinss ports.com/sporting-goods-store/images/everlast-boxing-lace-style-train ing-heavy-bag-glove.jpg
Web Design Supermarket Says:

January 23rd, 2009 at 3:10 pm

Clearly Google are yet to be squeezed in the big crunch but these numbers are obviously not sustainable in a depression – surely anyone knows that???
Resultados de Google Q4 2008 | WebCpu Says:

January 23rd, 2009 at 8:57 pm

[...] el sitio MarketingPilgrim dicen además algo que es muy cierto: en ausencia de un competidor digno en la web (tomando en [...]
» Search Engine Weekend Wrap-up Jan 25 Says:

January 25th, 2009 at 7:48 am

[...] Google Announced Q4 Earnings; Getting Back to its Fighting Weight [...]
John Hunter Says:

January 25th, 2009 at 12:49 pm

Good write up and good news for Google all things considered. The idea of just giving new options when stock prices go down (Google is just following the consistent practice of most companies) shows how phony that practice really is. If the company stock declines we will just forget the original contract and give you a better deal but if the company stock soars sure just keep the original contract. I just wish the companies would be more honest that they are just going to give big rewards that they don’t want to have to account for as an expense. Other companies largely restrict this practice to the already massively overpaid executives so I find it less bad when Google does it for a wider group of people. But in any case it is a lame practice.

John Hunter’s last blog post..Using Free Content to Boost Your Sales
Jacques Seoman Says:

January 25th, 2009 at 1:59 pm

I like the fighting weight analogy….now let’s see if there are any serious challengers to the heavyweight search crown of the world!
Resultados de Google Q4 2008 | WebCpu Says:

January 26th, 2009 at 6:12 am

[...] comparación con el año pasado pero el año pasado no devaluó nada de este calibre. En el sitio MarketingPilgrim dicen además algo que es muy cierto: en ausencia de un competidor digno en la web (tomando en [...]

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