Earnings season is getting into full swing in the technology sector, with Google set to release first-quarter results Thursday. Wall Street will be looking at Google’s announcement for clues about the Internet advertising market in general, before Yahoo and other companies release their numbers.
In addition to being the first in the online-ad market to report results, Google is far and away the dominant player in the industry, accounting for more than 65% of all U.S. search queries, according to comScore.
Analysts are expecting evidence of advertising growth after last year’s economic troubles. A recent report from PricewaterhouseCoopers and the Interactive Advertising Bureau indicated that the online market is picking up. PiperJaffray analysts write that they have seen a “significant recovery in online ad markets” and expect Google to have benefited from that in the first quarter. Inquiries made with marketing firms indicate that spending on search ads is increasing, Mark Mahaney at Citigroup writes.
That overall trend should benefit others in online advertising, including Yahoo. Gene Munster at PiperJaffray expects Yahoo to see gains from a “continually recovering” market in display ads, which are the graphical ads that appear on Web sites. Of course, Yahoo faces difficulties when it comes to share of search traffic. Google is clearly the top dog, and Merrill Lunch’s Justin Post writes that “Yahoo is losing share to Bing, especially key commercial queries.” In the previous quarter, Yahoo’s search revenues were down 15% year over year.
Analysts following Yahoo also will be looking for details about the Microsoft-Yahoo deal, in which the two companies are integrating their search functions.
For Google in particular, mobile advertising also will be key. Mr. Mahaney believes that “search queries per smartphone are on a trajectory to match search queries per PC” over the next three to four years. Google itself has been bullish on the mobile market, with executives pointing to the move to mobile ads and services as a primary focus for Google. Expect executives on the company’s earnings conference call to discuss the issue specifically again.
But analysts aren’t expecting much from Google’s other mobile offering “” the Nexus One, the Google-developed phone that runs on the company’s Android mobile operating system. The phone has met with good reviews, but Google’s method of selling it hasn’t been well received. The company has been selling the phone online only and without traditional marketing tie-ins at other outlets. PiperJaffray expects that estimates for the full year for sales of the phone will be reduced.
Finally, analysts and others will be looking for comment from Google about its recent actions in China. The company made waves by deciding to redirect its Chinese search service to the uncensored servers in Hong Kong. Although analysts don’t expect Google’s move to have an impact on current or short-term results, moving out of the fast-growing Chinese market could present a problem in the future.
April 14, 2010
source: blogs.wsj.com
3 Responses to “Google, Yahoo and the Internet Ad Market”
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