Google has disappointed stock markets with its Q4 2011 financial performance. As a result their share price is down 7% in today’s trading.
Google is now such a large and complex company that it is difficult to isolate any particular feature. However, Google remains highly dependant on pay per click revenues from the Google Adwords and Google Adsense products. And of these, more than 10% come from the UK. It seems that although revenues are up 27%, profits have risen by a measly 8%. Indicating that costs are now rising much faster than revenues. Some of this trend is due to acquisitions and external events. But some will be due to Google’s spending on pojects such as Google+.
On the pay per click front, paid click volume rose by 34%, whilst average cost per click fell 8%. In my opinion this is a function of Google “sweating” the paid area of the search engine results pages. By this I mean the observation that Google has increasingly reduced the overtness of paid, or sponsored, results versus organic results. This trend cannot continue indefinitely.
Once I’ve had time to analyse the Google’s Q4 financial results in more detail, I will add some more feedback.