flock

• Google earnings expected to be grim when they are released Thursday. According to the WSJ, U.S. search advertising spend fell 8% in the fourth quarter of 2008 from the same period in 2007, according to a new study from search advertising firm Efficient Frontier, whose search industry spending index was flat for most of 2008. The study — which covers an undisclosed portion of the $750 million in annual spending the company manages globally — marks the first quarter of negative annual growth for its index in the several years Efficient Frontier has been gathering such data, says James Beriker, president and CEO of the firm”.
• Sampling a search advertising firm may not predict the whole industry pie that includes Google, Yahoo and MSN, but if search marketers are seeing revenues drop, it should be a good sample of what is to come.
• Here are a few things that might throw off the numbers for Google.
  • First, if market share had anything to do with it, Google’s has actually grown to 72% over last year’s 65%. That a direct result of more online search adoption, and could help to offset falling revenues. I said the same thing with Amazon, where the reason why they had such a big holiday season was a simple math problem.
  • Second, Google has been pulling out all the stops this quarter to find new avenues to drive revenue. In September, Google began allowing beer and wine companies to advertise, and as of recently hard alcohol companies. In addition, they have begun monetizing Google Maps, casual games, mobile search, and more for the first time ever.
  • Third, Google has always said that in a bad economy, many retailers and other advertisers flock to Google because it’s one of the few places to keep a close eye on your pennies. Between Google Analytics and conversion tracking, it’s unlike any other form of advertising. Holiday advertising spend showed this.
  • Fourth, Android, Google’s mobile operating system is expected to pick up quickly this year and is expected to out sell the iPhone’s OS by 2010.
• To me, it’s not this 4th quarter that is worrisome. Between Google adding new ways to monetize different products, adding significant market share and branding themselves as ‘the place to go to advertise in a bad economy’, they will be fine. However, I think Q1 will see tougher times for the search giant. Q1 will see a Google that has squeezed out revenue from any potential products, no holiday season and a slowly growing online search adoption through the first 2 quarters. Here are a few more stats from the study:

• • “Advertisers who spend less than $50,000 on search ads cut their spending by 23% year-over-year, while advertisers that spend more than $200,000 on search per month cut spending by 9% during that time. Purchases by advertisers who spend between $50,000 and $200,000 were relatively flat.”
  • “Finance and automotive advertising continued to deteriorate. Search-ad spending among financial advertisers fell 20% compared to the fourth quarter of 2007. Search spending from automotive advertisers declined 15% during that period.”

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