What a difference a year makes. Google, whose stock famously rose from an IPO price of $85 in August, 2004 to over $700 by the end of October, 2007, seems to be losing its spark. It’s certainly lost its luster among investors, its stock price dropping almost 60% over the last year (see chart, right), despite posting comfortably double-digit top-line growth rates through Q3 and stable bottom-line growth as well.

Sure, the economy has been in recession, officially, for a year (at least in the U.S.), and the online ad market, which Google certainly dominates, has taken a battering among prognosticators. But Trip Chowdhry, an analyst at Global Equities Research, is expecting Google to not only slow revenue growth, but to go negative, in 2009 and 2010, for a more specific set of reasons:

• keyword volume is dropping, down 2-5% year-on-year
• bidding is mixed, but down overall
• the macroeconomic downturn is outweighing the traffic move from offline to online, specifically reducing advertisers’ spend
• Microsoft is mounting a move into cloud computing and even into Google’s publishers’ advertising services turf
• YouTube continues to monetize poorly

Perhaps in anticipation of the effect of sunk costs and factors beyond their control, Google issued a mailer with the alliterative title, Top Tactics for Tough Times, encouraging AdWords advertisers to spend more effectively, and to spend more. On the first page, it emphasizes a piece of data from an Epsilon study:

Marketing is more important than ever. 94% of CMOs believe that “a tough economic period is precisely the time when marketing plays a key role.”

Slightly more subtly, it offers (courtesy of Jupiter):

Search advertising is particularly valuable now. 83% of search advertisers plan to maintain or increase their marketing spend in the next 12 months. 

Google providing suggestions and “encouragement” to their publishers is not a bad thing; the timing is just a little suspect. And it comes against a backdrop of gloominess from the Googleplex. Google CEO Eric Schmidt hinted at belt-tightening, taking away resources from the company’s vaunted skunkworks program. More quietly, the company has been slowly shedding its large contracted labor force since August.

Continuing to buy (wisely) during a downturn is a maxim a good number of marketers are abiding by. Or at least Google hopes so. They might also hope for the same among equity investors.

This entry was posted on Wednesday, December 3rd, 2008 at 4:47 pm and is filed under Online Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.