previous blog posting<\/a> about how Google increased the monetization of their SERP in Q3 by:<\/p>\n(1) adding up to 3-north-listings (above algo results),<\/p>\n
(2) increasing north coverage significantly, and<\/p>\n
(3) Variable-Term-Pricing (setting min max-bids on a per-term basis, rather than a flat $0.05 min).<\/p>\n
\u00a0These changes led Google to a very strong Q3 where they showed a sequential growth of 14% over Q2 of 2005, a very strong increase for a typically slow summer quarter. That, however, sets the standard very high for Q4 of 2005, hence my prediction that they will miss the wallstreet estimates for Q4 sequential growth. I monitored their UI closely in Q4 and did not see any significant monetization changes to boost Q4 ala what happened with Q3.<\/p>\n
In fact, Google admitted that fact in an Nov 2005 SEC filing which stated: “seasonal trends in the third quarters of 2005 and 2004 may have been disguised by certain monetization improvements to our advertising programs,”<\/p>\n
\u00a0That said, there is many other reasons to\u00a0sell GOOG, for example:<\/p>\n
1. YPN will be hitting the Adsense program hard in 2006 once it’s out of beta. The adsense program is indeed starting to slow already, the google network\u00a0revenue grew by 7% sequentially in Q3-2005\u00a0as opposed to 20% for google site.<\/p>\n
2. Google is going nuts with capital spending (it\u00a0spent almost twice what Yahoo spent)<\/p>\n
3. Google is also hiring like nuts, 800+ people in Q3,\u00a0on top of\u00a0700+ people in Q2 (i.e. a 1\/3 of Google’s work force joined in these two quarter). There is two downsides to this: (a) they are hiring lower quality folks (we interview same folks and see who they pick), (ii) they are hiring like yahoo was in 1999\/2000, i.e. hiring today expecting that more revenue will come later, that is not always true (as yahoo learned the hard way and laid off a ton of folks in period 2001-2003).<\/p>\n
4. Google has been growing the cost of revenues much faster than revenue, in fact their operating margin fell from 35.2% in Q1 of 2005 to 33.5% in Q3<\/p>\n
In summary, if you have been thinking about selling\/shorting google, now might be a very opportune time. I will symbolically short 1 share of Google tomorrow \ud83d\ude09<\/p>\n
— amr<\/p>\n
update<\/strong>: A colleague of mine reminded me that Google did a SERP UI change in early December, they increased the font-size for the East adword listings (i.e. listings on the right rail of the page). We call this type of change an “accelerator change”<\/em> which is usually done to try and catch up with revenue projections, its another signal that Google’s Q4 quarter is a bit in trouble. Note that they launched this change after the peek of xmas shopping.<\/p>\nupdate:<\/strong> As promossied I did short Google on the morning of Jan 13, 2005. I actually shorted 10 shares\u00a0at $465.<\/p>\n\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
\u00a0 That is my prediction. For some history, read my previous blog posting about how Google increased the monetization of their SERP in Q3 by: (1) adding up to 3-north-listings (above algo results), (2) increasing north coverage significantly, and (3) Variable-Term-Pricing (setting min max-bids on a per-term basis, rather than a flat $0.05 min). \u00a0These […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-19","post","type-post","status-publish","format-standard","hentry","category-work"],"_links":{"self":[{"href":"https:\/\/www.awadallah.com\/blog\/wp-json\/wp\/v2\/posts\/19","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.awadallah.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.awadallah.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.awadallah.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.awadallah.com\/blog\/wp-json\/wp\/v2\/comments?post=19"}],"version-history":[{"count":0,"href":"https:\/\/www.awadallah.com\/blog\/wp-json\/wp\/v2\/posts\/19\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.awadallah.com\/blog\/wp-json\/wp\/v2\/media?parent=19"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.awadallah.com\/blog\/wp-json\/wp\/v2\/categories?post=19"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.awadallah.com\/blog\/wp-json\/wp\/v2\/tags?post=19"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}