22-04-2005 02:44									#1
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Google just reported pretty damn healthy advertising sales and extreme profits for the first quarter. $369 million in profits on $1.256 billion in sales.

In other words, a 29% net margin compared to 22% for the monopolist Microsoft. This has got to be one of the highest net margins of any company in the US.

quote: Google tops view, and stock soars Shares rise to $215 in after-hours actions By Bambi Francisco, MarketWatch Last Update: 5:05 PM ET April 21, 2005 SAN FRANCISCO (MarketWatch) -- Google, the No. 1 search engine, said first-quarter profit shot up more than fivefold on revenue that doubled as more businesses placed ads on Google's site, and those of its distribution partners. Late Thursday, Google (GOOG: news, chart, profile) said first-quarter earnings catapulted $369 million, or $1.29 per share, from $64 million, or 24 cents per share, in the year-ago period. Excluding a stock-based compensation charge of $49 million and a tax benefit of $49 million, Google earned $1.29 per share. Analysts surveyed by Thomson Financial had expected the company to make 92 cents a share on average. Shares shot up 6% to $215.93 in after-hours action. The last time Google traded at these levels was after it reported fourth-quarter results in February. The intraday high at the time was $216.80. Mountain View, Calif.-based Google said quarterly sales rose to $1.256 billion from $651.6 million a year earlier. Excluding the payments Google makes to other companies to acquire Internet traffic, the company generated sales of $794 million, more than the $731 million analysts had expected. The unorthodox technology company founded by Stanford graduate students Sergey Brin and Larry Page impressed Wall Street in its third quarterly report after going public in August. Google is benefiting as companies spend more of their advertising dollars online and as the prices paid for keyword-based search results rise. No forecast, more shares True to form, Google did not provide a financial forecast in its earnings release. Analysts currently expect Google to earn 93 cents a share in the second quarter on sales of $768 million. For the full year, the search firm is expected to earn $3.94 a share on sales of $3.2 billion, up 67%. In 2006, analysts are forecasting that Google will earn $5.12 per share on sales of $4.4 billion.

	22-04-2005 02:46									#2
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those bastards

	22-04-2005 02:46									#3
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What's their ROI?

	22-04-2005 02:49									#4
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how does google make money when all their services are free?

the internet economy confuses me, I admit.

last I heard, internet advertising was crap, because most people ignore ads.

	22-04-2005 02:52									#5
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Their ROI is something like 50%.

	22-04-2005 02:55									#6
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For that, I take my hat off.

	22-04-2005 03:09									#7
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quote: Originally posted by Dissident how does google make money when all their services are free? the internet economy confuses me, I admit. last I heard, internet advertising was crap, because most people ignore ads.

It makes money off "sponsored links" (the links at the right side of the page). Companies pay to be listed there for certain search terms.
IIRC, companies can also buy a high rank in Google, but I'm not sure on this.

Internet advertising in general is still not good, but search engine advertising (Google, Overture) is good business.

	22-04-2005 03:35									#8
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quote: IIRC, companies can also buy a high rank in Google, but I'm not sure on this.

Nah, they don't do that.

	22-04-2005 03:37									#9
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Businesswise, there seems to be something right about Google. They just offer better services than anyone else yet make tremendous profits.

	22-04-2005 03:40									#10
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quote: Originally posted by DanS Nah, they don't do that.

With the kind of money they're making (and considering they refuse to reveal their sorting mechanism) you can bet your arse they are.

Not that it matters, it's still the best damn search engine out there...

	22-04-2005 03:44									#11
	Tired of ads?

Well, they say they aren't. And as a public-traded US company, lying like that would earn you a hefty legal bill.

	22-04-2005 03:44									#12
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quote: Originally posted by DanS Nah, they don't do that.

That is correct... you can not pay to be listed higher in the normal "organic" search listings. While you can pay other companies who claim they can play some tricks to improve how high your company gets listed (some successfully and others not) Advertisers can only buy the text ads/links that appear usually above or to the side of the search results.

	22-04-2005 03:47									#13
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quote: Originally posted by Locutus they refuse to reveal their sorting mechanism) you can bet your arse they are.

No... they don't reveal their sorting mechanism to keep companies from figuring out how to "beat the system"

They are constantly changing it to stay one step ahead of companies who promise they can help you get a better listing rank. It's like an "arms race" with the search engines trying to stay one step ahead of the search abusers...

They make MORE than enough money on the paid text ads...

	22-04-2005 03:51									#14
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quote: Originally posted by DanS Well, they say they aren't. And as a public-traded US company, lying like that would earn you a hefty legal bill.

Yes, because an enterpreneur caught lying would be unprecedented in the history of American business


I've worked with some experts in the area of information retrieval in the past and NOONE in that field believed for a second Google's not selling their ranking. Of course, that was before they went public and it's not unprecedented for an entire scientific community to be wrong either...

	22-04-2005 03:53									#15
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Hey, Ming. I've been wondering whether Google is mostly taking advertising business from other mediums or is growing the advertising pie. Have any thoughts on that?

	22-04-2005 03:54									#16
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Google can't afford to "sell out" to companies when it comes to the organic search results... but not for why DanS suggests..

It's a credibility issue... if users thought they were using a search engine that provided "tainted" results, they were stop using it... and the golden goose would be dead.

Again, you have no clue how much they make on their paid text ads... they spend tons of money to stay ahead of technology to make sure their search results are not tainted in anyway.

	22-04-2005 03:55									#17
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quote: Originally posted by DanS Hey, Ming. I've been wondering whether Google is mostly taking advertising business from other mediums or is growing the advertising pie. Have any thoughts on that?

They are not growing the advertising pie... Their expansion is coming off the backs of all the other media, but mostly print.

	22-04-2005 03:57									#18
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And what's the total US and worldwide ad market? (I.e., do they have a lot of room to run?)

	22-04-2005 04:14									#19
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I'd have to look up the numbers, but they are HUGE.

And currently, online is just a pimple on the horses ass.
The potential is unbelievable.

	22-04-2005 04:18									#20
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It occurs to me that Google went after a much larger market than did Microsoft, et al. (i.e., advertising rather than software sales). This makes the Google v. Microsoft competiton truly interesting.

Last edited by DanS on 22-04-2005 at 04:39

	22-04-2005 04:20									#21
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As a sidenote:

I just read in a newspaper today that the big bosses at google has a yearly salary on $1 USD

It was their own idea though, since they've made enough money the other years...
I didn't do a search on it, so I can't say for sure that this is true or not

	22-04-2005 04:21									#22
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It's true. The $1 salary followed Warren Buffett's decision many years ago to do the same thing at Berkshire Hathaway.

	22-04-2005 04:26									#23
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steve jobs gets $1 in salary every year too . . .

	22-04-2005 04:30									#24
	Help yourself to an AD-FREE life

Regarding the brewing Microsoft versus Google battle and the size of their respective target markets, Microsoft's revenue is only ~7x Google's, and Google just went public last year.

Microsoft thought they were hot stuff for spending $100 million to launch their search service, but Google more than triples that in earnings in just one quarter.

Pretty amazing stuff.

	22-04-2005 05:04									#25
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The key is to look at the potiential for recurring revenue. Ads is way better than software in that regard.

	22-04-2005 08:57									#26
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quote: last I heard, internet advertising was crap, because most people ignore ads.

They make money on the really really targetted ads. For example if I type in "Red Sox" I get ad for a ticket agency that I know paid damn good money to have their ad there.

The biggest problem that Google has is that companies are setting up bots that constantly click on their rival's ads to jack up the amount that they pay for advertising on google. That could come back and bite Google.

	22-04-2005 16:55									#27
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quote: Originally posted by Boshko The biggest problem that Google has is that companies are setting up bots that constantly click on their rival's ads to jack up the amount that they pay for advertising on google. That could come back and bite Google.

Yes... that is probably the most serious issue facing the "paid search" advertising category right now. Google is working VERY HARD with ad agencies and clients to deal with this situation. Legal action has already been taken against one company for do so... and new security measures are being taken to help identify other companies that are doing this.

	22-04-2005 17:17									#28
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Google could threaten to completely remove offenders' websites from their search engine

	23-04-2005 02:01									#29
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Google

	23-04-2005 02:02									#30
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quote: Originally posted by Ming Yes... that is probably the most serious issue facing the "paid search" advertising category right now. Google is working VERY HARD with ad agencies and clients to deal with this situation. Legal action has already been taken against one company for do so... and new security measures are being taken to help identify other companies that are doing this.

Companies that are setting up bots are idiots for doing so, Google where know EXACTLY where all the hits are coming from, so unless they are farming out their hits to several sources, they are going to be found out.

Glad to see Google sticking their legal team on these idiots.