
Google Off 5%: Q2 Misses as ‘Cost-Per-Click’ Falls 6% - kjhughes
http://blogs.barrons.com/techtraderdaily/2013/07/18/google-off-5-q2-misses-as-cost-per-click-falls-6/
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leeoniya
Probably the reason they're pulling a dick move and forcing everyone to
Enhanced Campaigns which, among other things, forces you to bid on tablets and
desktops together rather than allowing you to split them. They claim that
conversions are virtually identical across these devices. However, our
conversion on tablets is probably 1/10 that of desktop because we mfg & sell
highly technical products for diy home remodeling and most tablet users end up
just browsing casually for the info.

~~~
opinali
Then just set Bid adjustment to -100% for mobile devices and tablets with full
browsers.

~~~
leeoniya
from what i understand (and on conference calls with our google reps), there's
no more "tablets", it's a single category "desktops/tablets", but you can do
"-100%" to exclude "mobile" (phones)

we were compelled to make the switch today, actually. it's gonna be an
expensive Jul/Aug for us. we've adjusted some of our checkout pipeline so
there's less typing for tablet users...eg paypal/amzn payment are shown first
in list, less steps overall also. but it's not going to boost anything by an
order of magnitude - basically just damage mitigation :(

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Shinkei
I never understand this phenomenon of how shares instantly drop in value based
on a single quarter of earnings that don't meet 'estimates.' Suffice it to
say, I do understand a bit about markets, but maybe somebody can educate me
further.

There is no way that individual investors are moving the stock enough in the
minutes to hours post-earnings report to actually affect the price, so I'm
assuming this is 'market makers' that are selling off shares and pushing the
price down. But my question is... are they selling shares because they predict
other people will sell shares and so they are simply 'beating' the rest of the
market to avoid the predicted loss? Or are they selling the shares because
they actually believe they are worth less due to the report?

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btilly
Massively over-simplifying, the price of shares is what the last trade was at.
So it does not require a high volume to change the price - just buyers and
sellers agreeing on a different value.

And what is that value? The value of a share is the market's best estimate of
the present value of the future revenue earned from owning that share. Those
earnings can happen from dividends, stock buybacks, a takeover bid, etc. But
fundamentally they are an estimate of future profits.

So why does it move so fast? If you tell me that a major metric, the
revenue/ad, dropped 5% and all else held the same, unless you have a good
explanation for the anomaly, my simplest estimates of your future revenue just
dropped 5%. If I am afraid that the drop could be a long-term trend, my
estimates might drop further. If I believe that the metric has reasons to
recover, my estimates might drop less.

But the natural tendency is to base estimates of future revenue on current
rates of revenue. So a one quarter drop in current revenue results in a
corresponding drop in share price. (And vice versa.)

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anonymfus
BTW Google don't pay dividends and promises to don't pay "in the foreseeable
future".

[http://investor.google.com/corporate/faq.html#toc-
dividend](http://investor.google.com/corporate/faq.html#toc-dividend)

~~~
btilly
This is true. However 5 years ago the same could be said for a number of other
tech companies including CISCO, Oracle, and Apple. Yet all have since paid
dividends or done stock buybacks.

The market operates under the assumption that all other companies that stay
profitable long enough will eventually do the same. And as long as management
is seen as competent, is indifferent about whether "eventually" comes tomorrow
or 20 years from now.

For an extreme example, the markets have long rewarded Berkshire Hathaway for
its growth in profits, even though no money was returned in any way to
investors for 40 years. (There has since been a small buyback.)

~~~
cmbaus
Dividends are only one way to value to companies. If Apple fired everyone
tomorrow and stopped selling products, their stock would still have value
because of the cash (and real estate, etc) they have on the books.

Buffet basically assumes that he is a better investor than his shareholders
and by not paying taxes twice (corporate and individual) on dividends he will
do better investing the profits and growing book value than his shareholders.
Pretty good assumption so far.

~~~
btilly
Actually, no. Dividends don't give companies value. (In fact every time you
pay one, your stock price drops by the amount of the dividend.) They return
value to shareholders.

Yes, you're right about Buffet. And because the market is indifferent about
when money gets redistributed, they are happy at this point to pay around
$100K/share despite those shares having value tied up in a company that has
shown very little willingness to distribute any earnings to investors.

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mp99e99
Because it affects earning estimates going forward, if they "beat", analyst
can raise estimates looking out 5 years [so the results look like they are on
track to be way better than estimated], or vice-versa, when you miss you have
to take down your future estimates of growth. Then its discounted to the
present. Thats why it moves, its not about this quarter, its about adjusting
all the expectations of the future down and to the present, all wrapped up
nicely in a stock price.

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lazyjones
Perhaps they should reconsider some of their AdWords bans (not AdSense).

We got an apparently lifetime ban for misspelling "iphone" as "iiphone" when
our ad mananger didn't understand why everyone else could put up ads for
iPhones and we couldn't and kept getting these ads blocked (supposedly for
trademark reasons, but our use was 100% legitimate).

Now there's no chance to talk to anyone in charge (typical Google "service")
and they've lost a customer who has been spending 6 figure amounts/year. I am
biased, but somehow I don't see what Google is gaining from this.

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mark_l_watson
Really off topic (sorry), but maybe G's quarterly results reflect the overall
economy?

I was hiking with some friends today and someone raved about the stock market.
I said that I am getting out (I did this also in 2007) because I expected
another recession. I hope I am wrong, but I think we are going to see another
2008 event, but larger. This would also effect tech stocks.

~~~
edias
I really doubt it. If anything I think it speaks to the value placed on online
advertising, which I'm rather pessimistic about in general. It is a huge leap
to go from slightly missed quarterly results to a downturn in the overall
economy.

Do you have anything to substantiate this feeling that there's a second
recession coming?

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mark_l_watson
To, be honest, it is just a strong feeling that I am personally acting on. I
am not offering investment advice.

~~~
edias
That's fair, and I agree with you to some extent. Detroit filing for
bankruptcy is certainly indicative of future trends as pension obligations and
other long term expenses begin to mount, but the extent to which it affects
the overall economy I'm not so sure about.

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kjhughes
I think the interesting question here is whether the 6% drop in cost-per-click
is the beginning of a problem for Google.

Is the market justified in worrying about a drop in the average cost-per
click, even when the number of paid clicks is rising?

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rgbrenner
Doubtful... my guess (since I don't care enough to actually read their
financial statements) is that the lower CPC is because mobile is growing
faster than desktops.. and so they're getting more mobile clicks (which pay
less). So in this case, after it's averaged out, they end up with a lower CPC.

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decryptthis_NSA
There was a discussion on "How Google is Killing Organic Search"
[https://news.ycombinator.com/item?id=5971560](https://news.ycombinator.com/item?id=5971560)
by essentially having all ads on the first page. I wonder for how long can
Google keep doing that, before users and site owners revolt and leave /promote
another engine?

Looking at their press release, ad clicks increased by 23% over the last year
and 4% over the last quarter. What are they going to do for the next quarter
when search already looks like this [http://www.searchenginejournal.com/wp-
content/uploads/2011/1...](http://www.searchenginejournal.com/wp-
content/uploads/2011/12/Google-Adwords-HD-Monitor.jpg) and
[https://gs1.wac.edgecastcdn.net/8019B6/data.tumblr.com/28762...](https://gs1.wac.edgecastcdn.net/8019B6/data.tumblr.com/28762be645878e424f6c67d68fbf2e6a/tumblr_inline_mp48v9dXx01qz4rgp.png)
? Add even more ads?

Google, as a company, desperately needs new sources of revenue, Google Search
is already over-monetized. I wouldn't touch Google at current stock prices.

Edit: Turns out that most people do not even realize that they clicked on ads,
given how similarly they are displayed. FTC warned them and others to
distinguish results from ads [http://www.bloomberg.com/news/2013-06-26/ftc-
tells-google-le...](http://www.bloomberg.com/news/2013-06-26/ftc-tells-google-
led-search-providers-to-distinguish-ads-clearly.html)

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at-fates-hands
>>>>Google, as a company, desperately needs new sources of revenue

It seems like every time they try and branch out from search and monatize some
of their products, they fail miserably and then the pundits jump on them and
tell them they should just stick with what makes them money - search.

It's a nasty cycle they're in.

~~~
fear91
Contrary to what they say about themselves, they can't really innovate. Search
is what makes them. Can you imagine Google without it?

They'd be nothing.

All their existing products are copycat/published with the search leverage.

Imagine a rich kid who starts his own business. He thinks he's successful but
it's his parents who feed him cash and make it easy for him. He never had to
really fight for it.

It's the same with Google products - they can't fight for themselves, instead
they rely on their daddy(search) to achieve success.

Now look at Apple or Samsung - they have many different products that are
relatively successful. Meanwhile the big G only has one cow to milk - the
search and they burden it with more and more ads with each quarter. They can't
do it ad infinitum because too many people would run away from them. And it's
not really improving, just abusing the previous success until it's still
possible.

Larry Page should stop doing what he's doing. It's going to destroy this
company sooner or later.

Does the stock price has to always rise? How much money do you really need?
Just ignore cash and try to build something great, maybe then you will be able
to truly innovate?

