I originally posted this on the Google Finance discussion boards and then though I’d fix it up a bit before posting… but well anyway…

I was bearish on Google before the last earnings call.

I felt that Google would miss some numbers due to recent changes
they’ve made in the “clickable area” of their ads and their PageRank
formula. Both changes were good long term (since they’ll help combat
click fraud and spammy publishers – and generally increase the quality
of the ads). But the changes came with some immediate cost to the
bottom line in the short term.

I am now bullish on Google for the same reasons. Or really because (1)
it wasn’t that bad and (2) the long term is already here.

People were and still are very concerned with the fact that Google’s
growth in clicks has slowed down

But when you consider the fact that Google decreased their clickable
areas by over 50% and publishers (like myself and others) have spoken
up saying our AdSense revenue is down nearly 50%, Google as a whole
staying flat for the quarter/year is Amazing

Changes to Google’s formula causes sites like InvestorGeeks and many
others to lose 50% revenue, meanwhile Google grows only just a little
bit. They must have been bringing on an incredible number of new
clients/advertisers to make up for that hit.

And like I said, the impact is temporary. The impact to click throughs
has already happened. The folks building click-farm websites to game
Google ads for money are mostly dried up and weeded out of the

These changes will result in better quality clicks, which will result
in advertisers spending more money for ads, which will result in
higher rates for the ads (give it some time to filter through), which
will result in more money for Google.

Bottom line, despite the fact that click-throughs and thus revenues
stalled a bit Q407-Q108, Google’s business has continued to grow
. In
fact, I’m suggesting it must be growing faster than ever to keep up
with the impact of these recent changes SHOULD have had. And since
that impact is pretty much over… Google’s impressive growth WILL be
apparent in the next earnings call.

GOOG is relatively cheap now. Get it while you can.

[caveat here: since posting this GOOG has gone on a bit of tear (with the rest of the market) so be careful with respect to short-term moves.]

And as always, be careful, do your own research, and make your own

I appreciate your thoughts.


An interesting reply from “Bob Oliver Bigellow XLII” on the original post:

I agree with most of what you said. However, now that the DoubleClick
deal is complete, they are going to take a substantial hit from that
purchase. So, I expect their next quarter to not look very good.
Similarly to the quarter following their YouTube acquisition. I
believe the quarter after next should look good, however, for many of
the reasons you stated.