Interesting read by John Shinal of Marketwatch.com, indeed, Google can afford to have a few misses because the market is so large and growing so quickly.
“And just one roofing job is a good return for an ad [on Google] that costs him less than $300 per year.“What’s a couple of hundred bucks a year? My Yellow Pages ad costs $1,500 a month,” Johnson told me.That kind of price disparity gives you an idea of why Google is a threat not only to online search rivals like Yahoo Inc. and Microsoft Corp.’s MSN service, but to media companies and anyone else whose profit margins depend on the inefficiencies of ad pricing.Here’s the best statistic to illustrate the scope of the Google threat. For all of 2006, online ad spending is expected to rise 27% to about $16 billion, according to the research firm eMarketer.Yet Google’s revenue - all of which comes from search ad revenue - is expected to rise 80%, to just over $7 billion. And that doesn’t include anything it might generate from its pending acquisition of video-sharing site YouTube, one of the fastest-growing properties on the Web.Companies can generate growth in several ways, either by entering new markets, taking a bigger share of existing markets, squeezing more profit out of those markets or maintaining a share of markets that are growing.Google, which is taking a larger share of the growing Internet search ad market and does a better job than its rivals of squeezing more profit out of every search query, has the benefit of all four of those growth drivers right now.“Their revenue is growing faster than search traffic, which means the number of search users doesn’t have to grow” for Google to generate continued growth, said Connor Browne, a co-manager of the $3 billion Thornburg Value Fund, which owns Google shares.Of course, Google’s search traffic is growing like crazy, which is why Browne and other fund managers still like Google’s stock even as its price approaches $500.
Read more.
Digg this Blog
Share on Facebook
WatchMojo on Twitter
WatchMojo on YouTube
Add to Favorites
WatchMojo Newsletter
