Google Posts Strong Q4, Struggles to Monetize Social Network Inventory

  |  January 31, 2008   |  Comments

UPDATE Earnings climb to $1.2 billion, up 12 percent over the same period in 2006

Google's advertising efforts on social networking sites like MySpace and its own Orkut platform are "not monetizing as well as expected," CFO George Reyes said and other executives concurred during the company's quarterly earnings call.

"We have a huge amount of social networking inventory," explained Larry Page, Google co-founder. "It varies quite a bit how well we monetize, based on a number of factors, some of which we understand, some of which we don't."

Despite that bit of discouraging news, Google's results were strong overall. Net income for Q4, the three-month period ended Dec. 31, 2007, rose 12 percent year over year to $1.21 billion on a 51 percent increase in revenues. Total revenue totaled $4.23 billion, a gross figure that does not take into account traffic acquisition costs (TAC).

Revenue from Google's own sites was $3.12 billion, or 65 percent of all revenue, while revenue from partner sites -- including AOL and Ask.com -- was $1.64 billion, or 34 percent. Google's revenue from AdSense grew 37 percent over Q4 2006, according to Reyes, despite the loss of some publisher partners, including Viacom, during the quarter.

Google is experimenting with various means of improving the performance of ads served on social networking platforms, including Myspace -- with which it has a long-term relationship -- Google's own Orkut service, and numerous others.

Specific plans for improving the monetization of such sites include enhancing demographic targeting and optimizing the ads' look and feel.

"We're running lots of experiments," Page added. "It's a big opportunity because it's so much inventory."

Regarding YouTube, CEO Eric Schmidt said the video site had grown very quickly in the U.S. and overseas. He hinted at a new round of "very sophisticated" video ad products, and said the company is working on simplifying its video offerings to please advertisers.

"There's been an issue around standardizing ad formats for advertisers who would like to do [integrated] buys," he said.

Google's revenues from outside the U.S. made up 48 percent of its total for Q4, and the U.K. accounted for 14 percent of global revenue.

The earnings report was preceded by an extended decline in the company's stock price, during which per share value fell 26 percent from a peak of 741 in early November to 548 last week.

That decline may be partly owed to fears of a recession's impact on all advertising, and partly to recent ComScore findings that Google lost a hair of market share in December, while Yahoo gained slightly. However, the Mountain View company's conquest of search ad dollars continues unabated. Among clients of SEM firm Efficient Frontier, Google's share of the overall search marketing spend grew to 77 percent .

Schmidt said the company has picked up no hints of a macro-economic slowdown in its advertisers' spending activity.

"I'm happy to say that we have not yet seen any negative impact from the rumors of future recessions," he told investors. "We'll see what happens."

Google's TAC continued to rise during the quarter, including payments made to search and AdSense publisher partners, representing 30 percent of all advertising revenues for the quarter versus 29 percent in Q3.

Strong as they were overall, the results appear to have missed Wall Street expectations for the company, as its share value declined 7 percent in after hours trading.

This report has been updated with new information.

ClickZ Live San Francisco This Year's Premier Digital Marketing Event is #CZLSF
ClickZ Live San Francisco (Aug 11-14) brings together the industry's leading practitioners and marketing strategists to deliver 4 days of educational sessions and training workshops. From Data-Driven Marketing to Social, Mobile, Display, Search and Email, this year's comprehensive agenda will help you maximize your marketing efforts and ROI. Register today!

ABOUT THE AUTHOR

Zachary Rodgers

Until March 2012, Zach Rodgers was managing editor of ClickZ's award-winning coverage of news and trends in digital marketing. He reported on the rise of web companies, data markets, ad technologies, and government Internet policy, among other subjects. 

COMMENTSCommenting policy

comments powered by Disqus

ClickZ Today is our #1 newsletter.
Get a daily dose of digital marketing.

COMMENTS

UPCOMING EVENTS

Featured White Papers

BigDoor: The Marketers Guide to Customer Loyalty

The Marketer's Guide to Customer Loyalty
Customer loyalty is imperative to success, but fostering and maintaining loyalty takes a lot of work. This guide is here to help marketers build, execute, and maintain a successful loyalty initiative.

Marin Software: The Multiplier Effect of Integrating Search & Social Advertising

The Multiplier Effect of Integrating Search & Social Advertising
Latest research reveals 68% higher revenue per conversion for marketers who integrate their search & social advertising. In addition to the research results, this whitepaper also outlines 5 strategies and 15 tactics you can use to better integrate your search and social campaigns.

WEBINARS

Jobs

    • Internet Marketing Campaign Manager
      Internet Marketing Campaign Manager (Straight North, LLC) - Fort MillWe are looking for a talented Internet Marketing Campaign Manager to join the...
    • Online Marketing Coordinator
      Online Marketing Coordinator (NewMarket Health) - BaltimoreWant to learn marketing from the best minds in the business? NewMarket Health, a subsidiary...
    • Call Center Manager
      Call Center Manager (Common Sense Publishing) - Delray BeachWanted: Dynamic Call Center Manager with a Proven Track Record of Improving Response...