Prior to the announcement of its monster Q3 earnings Thursday, Google's stock was down about $2, a ho hum dip in the big picture. Then, Google announced that its Q3 revenue jumped 23% to $7.3 billion, which blew away analyst predictions of about $6.67 earnings per share (It reached about $7.64 eps).
This astronomical rise puts Google it in striking range of Microsoft (at about $218 billion) and Apple (at about $278 billion) in term of overall market cap, and Goog might catch them both.
But what gets everyone really frothing at the mouth is that Google is now doing $2.5 billion of "non-text" ad revenue and $1 billion in mobile revenue, which means in other words, Google has officially become a multi-armed beast.
However, some are saying that it may be a little early to fly the "Mission Accomplished" banner, and that Google may not be quite as impressively positioned as they claim. Henry Blodget of Business Insider, says, "Google likely passes at least 50% of its $2.5 billion of non-text ad revenue through to content partners. This means that, on a "net revenue" basis, Google's non-text ad business generates only $1-$1.25 billion of revenue, or only about 5% of Google's total revenue."
And, in turn, because text-ads are cheaper to sell than display and video, operating profit for those is likely lower than it is for text, meaning that their non-text ad biz (including YouTube) might be contributing to as little as 5% of Google's overall profits.
AdSense and DoubleClick aren't growing particularly fast, and although YouTube may be a beneficial part of the pie, it, too, is a small portion of Google's overall revenue.
This is all to say, maybe Google still is a one-trick-pony, but their pony is still a f*cking prized pony, and they're still (and likely will always be) the derby winners in that race. The question becomes, then, is Google truly what they see themselves to be? If they are a one-trick-pony, and continue to be, what does that mean for future Goog projections?
Wouldn't the rapid growth of Android Technology based smartphone users serve to buoy the earnings for Google into the future? (Disclaimer: I am a huge fan of Google at the moment as I killed it with their stock in the past few weeks.) According to almost everyone, the use of Android technology will become the most commonly used platform for smartphone users heading into the next few years.
According to the following table, in Q2 of this year, HTC's (Major contributor to the Anroid marketshare) shipment of new units was up 63%. Samsung, which also uses the software, posted huge gains as well at 55.6%
http://www.wirelessandmobilenews.com/1010art/isupplismatphones.JPG
Not only that but in the first quarter of this year, Android sales surpassed that of the iPhone. While I acknowledge that the Anroid platform isn't enough to support the entirety of the company, wouldn't these data prove that Google has a viable way to expand and improve its earning potential moving into the future. Especially in light of the fact that the Android software is currently only available in 32 countries as compared to the iPhone being available in 88 countries. Seems like there is some pretty decent room for growth.
Very interesting article. While I would have been short GOOG for the longest time, for fear of no diversification beyond their initial revenue sources, nor any feasible long-term solution for organic/acqusition growth, they did suprise me with their earnings. I think they are definitely on the way up. Especially with the android booming in the US and soon to be the world. Also, their recent ventures into cars that drive themselves, and of course my $1.2B investment in wind energy off the mid-atlantic coast. Now the only thing, is figuring out how to fully understand the "pet" project investments and try and quantify the uncertainty surrounding their future earnings.
Written from an AAPL fanboy.
You guys dont understand...Google = SkyNet
Hmmm....I like it. I like it a lot.
I love a good conspiracy theory to get the weekend started. I smell a documentary
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