Google's results didn't match up to expectations and the stock dropped in value. Oh well, that's something that happens sometimes. What interests me a great deal more is the way in which we seem to be judging Google. I'm not really sure that we're going about it in quite the correct manner.
The company's investments in its Android mobile software and fledgling Facebook-like Google+ social network represent some of the company's key growth opportunities going forward. But Wall Street is still trying to understand the near-term impact on Google's business.
On Friday, Google's shares fell more than 8 percent. Google missed both its revenue and earnings targets after cost-per-click (CPC) -- or money that marketers pay Google when Websurfers click on its search ads -- decreased for the first time in two years despite record U.S. online commerce during the holiday season. Several brokerages cut their price targets on the stock.
The thing that gets me, and I am of course open to correction, is that much of how we judge Google comes from how well their various technologies are doing. If Google + is gaining members then this is thought to be good for the company going forward. If Android is gaining market share then again, this is thought to be good for the company.
And maybe those things are good for the company. But certainly at present they have almost no influence at all on the company's income. Android is free for example. And even if there are 90 million people on Google+ there is no charge for being there. It is entirely ad reliant for income: and the marginal impact of Google+'s page numbers, whatever they are, is going to mean very little to a company of Google's size.
For in financial terms Google isn't a technology company at all. It's an advertising company. And as such a softening of ad rates has far more impact upon them than the take up of a product, like Android, which they give away for free.
I don't want to make too much of this: it is certainly possible to make the linkage between the company's success in search technology and the ad rates they're able to charge, so technology is important. But I do think that it's worth noting than in the short and perhaps medium terms, advertising rates are going to have a bigger effect on the company's finances than any of the technologies they are developing.
