On Thursday, October 16, 2014, Google reported earnings after markets here in the US closed. Fiscal performance for the latest quarter failed to meet analyst expectations, for both sales and net income. A lot of business writers produced copy on the topic of whether or not Google’s performance for Q3 2014 says something about the future of their core business — meaning pay per click (PPC) advertising.
We think the quarter’s performance does say something on the above mentioned topic. Click advertising, with Google at the helm, has been a big example of how to move the kind of “lowest common denominator” marketing communications found everywhere on television, to the web. Instead of evolving into a tool promising big returns to average advertisers (meaning SMBs), PPC advertising has become even more difficult to capitalize upon, especially for intangibles.
This trend doesn’t look to change anytime soon. A big factor putting “meat to this motion” is the obsession of Wall Street with explosive growth. The only venue where advertisers can expect explosive growth in the number of ad impressions, is mobile computing, which is dominated by small screens (smart phones and tablets). So click ad campaigns have to be built to look good on “cards”, etc.
But does anyone looking for a complex solution to a business need think about surfing the “mobile web” from a smart phone to find a solution? We don’t think so. Apparently a lot of Google’s advertisers agree. The company reported an over twenty five percent drop in the rate of growth at which its paid click business is growing (17% for the current quarter vs 25% for the same quarter in fiscal 2013), year-over-year, for the 3rd Quarter 2014. This drop might not look like a big deal to Google fans, but to anyone considering the quarter from a perspective to render an opinion as to the long term viability of the click ad business, “it ain’t looking too good”.
We don’t think Google is especially pleased with its core business, hence all of the efforts it continues to make to horizontally stretch the horizon of its business into completely disconnected product paths. Maybe someone will sum all of this product marketing chaos into the picture of a “right move”, but we don’t think this likely until one of these forays into the “wild blue yonder” of tech product land takes off.
Will it be robotics? Self Driving Cars? Cheap DNA tests? Smart Phones as eye glasses? We’re not sure, but stay tuned. Google is sure to go there, and go there before anybody else. At least as long as they have the cash to pay for the ride.
Ira Michael Blonder
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