Now that Google
has blown out analyst expectations
with a sterling quarter, it can’t possibly do it again, can it?
The unrivaled search giant reported 70 percent revenue growth versus the
previous year’s third quarter, to $2.69 billion, and 48 percent earnings
growth, to $733 million.
Mind you, this rise took place during the summer months, when much of
Google’s traffic from academic circles is down.
But Google’s rivals should take note: The company hasn’t tired of being Wall Street’s darling and promises more heady days ahead.
Google executives said that improvements to the company’s core
infrastructure have laid the foundation for even stronger growth.
Better search algorithms are allowing the company to improve the
monetization of its inventory, said Sergey Brin, president of technology and
one of the Google’s co-founders, on the company’s earnings call this week.
This means that revenues will continue rising, even if Google begins to top
out in terms of traffic or the number of advertisers.
“In terms of monetization [of ad inventory], the low-hanging fruit has been
picked, but we’ve built ladders and we’re reaching for higher hanging
fruit,” said Brin.
Google president of products and co-founder Larry Page added that the
company still has a long way to go toward improving search results.
“I see very huge advances possible even in the very basic things we do,” he
Not that there’s any danger of Google’s growth slowing in the near term.
According to Merrill Lynch analyst Justin Post, Google has over 50 percent
of the search advertising market and, he wrote in a note this morning, “will
continue to gain share over the next four quarters.”
In addition to these bread-and-butter improvements, the company sees
enormous benefits accruing from strategic partnerships developed over the
The Google brand is also gaining significant traction abroad, partly thanks
to its deal with eBay
And it has not yet even closed its acquisition of YouTube.
“The diversity of our approach is one of our strengths,” said Google CEO
He noted that the strategic partnerships combined with improvements in
technology create a cascading effect that amplify and “compound each other
quarter over quarter.”
According to Emily Riley, an analyst who follows Google for JupiterKagan,
the company was putting out the message that it’s not interested in rivaling
“They’re not planning to become a media company. They want to be a
next-generation search company,” she told internetnews.com.
Post was also convinced that Google is executing on its plan.
“We estimate that Google’s monetization of search could be up to 50 percent
higher than Yahoo,” he wrote.
Post raised his earnings estimate for 2007 by 6 percent and said he
expects Google to gain further market share during this holiday season.