This page has been archived and commenting is disabled.
Google 1Q 2012 Earnings Update
Google posted robust 1Q results topping the consensus estimates by a wide margin – revenues increased 24% to US$10.6 billion as against US$8.6 billion in the same period, a year earlier. This was significantly higher than the consensus estimate of US$8.2 billion for the period.Revenues were in line with our estimates – we expect full year revenues to total US$43.1 billion. Revenues from Google websites accounted for around 69% of total advertising revenues while that from the partner websites contributed to around 27% of revenues. The remaining 4% of revenues were accounted for by licensing and other fees. Geographically, the US generated around 46% of total revenues, UK accounted for 11% of total revenues while other markets accounted for the rest 43% of revenues.
|
All paying subscribers should download the Google Q1-2012 Valuation Summmary, wherein we have updated the valuation numbers for Google using a variety of metrics. Click here to subscribe or upgrade. |
Growth in revenues was driven by an increase in click volumes, especially in the US market. The number of clicks increased by a significant 39% year-on-year and 7% quarter-on-quarter during 1Q highlighting the increasing popularity of the search engine. However, on the flip side, the cost-per-click or the average cost paid by advertisers declined 12% year-on-year during the period – largely due to the growing business in the emerging markets and mobile space, which usually carry lower margins. Nonetheless, Google's strong position in the mobile space – including both smartphones and tablets – is enabling the company to generate robust revenue growth. The Company also continues to benefit from the success of its DoubleClick ad exchange as well as the overall improving quality of advertisements. Google also witnessed growth in the European and Asian markets. Japan registered strong performance largely on account of higher contribution from SMB segment.
Total costs increased 16% year-on-year to US$3.8 billion as against US$2.9 billion in the same period, a year earlier. This was largely due to the fact that the Company made investments in new products, increased its advertising expenses as well as increased wages. Further, higher amortization charges, the data center operations cost as well as content acquisition costs drove the overall cost of sales higher. As a result, higher costs had a negative impact on gross margins which contracted by 136 basis points to 64.4% as against 65.8% in the year earlier quarter.
Operating expenses increased 16% year-on-year to US$7.3 billion as against US$6.3 billion in the same period, a year earlier. A 25% jump in selling and marketing expenses was largely responsible for the spike in operating expenses. The R&D expenses in fact declined as a percentage of sales during 1Q. Higher operating expenses had an adverse affect on margins which contracted 77 basis points to 31.8% during 1Q.
From the profitability perspective, Google outshone nearly all its competitors as earnings increased by a significant 61% to US$2.9 billion (or US$8.75 per share) as against US$1.8 billion (or US$5.51 per share). Further, the Company continues to have a strong balance sheet with cash balances at an enormous US$49.3 billion at the end of 1Q.
All paying subscribers should download the 
Google Q1-2012 Valuation Summmary, wherein we have updated the valuation numbers for Google using a variety of metrics.
Google still exhibits the likelihood that they will control mobile computing for the balance of the decade. A couple of bits from our archives...
The table of contents outlines how we have broken Google down into distinct businesses and identified both the individual business models and the potential revenue streams, as well as valuation for each business line.
Page 57 of the analysis shows a sensitivity table which outlines the various scenarios that can come into play and how it will change our outlook and valuation opinion.
Professional/institutional subscribers can actually access a subset of the model that we used to create the sensitivity analysis above to plug in their own assumptions in case they somehow disagree with our assumptions or view points. Click here for the model: Google Valuation Model (pro and institutional). Click here to subscribe or upgrade.
- advertisements -
I remember thinking how unusual GOOGLE is for a corporate name and figured it was probably an acronym... so I came up with GOVERNMENT ONLINE OBSERVATION for GLOBAL LAW ENFORCEMENT.
Despite what Google claims that their name came from a number with 100 zeros, I'm convinced it's a play on Yahoo's first CEOs name, Tim Koogle or TK as we called him.
The story that my father told me as a child (this was in the sixties) was that the word agoogla (maybe he meant googol) originated by a mathematician after his baby babbled it while he was thinking about the 1 with 100 zeros.
i'm still trying to figure out how google makes money. it all seems to be based on click fraud (not that they are the only guilty party there) if you ask me. i can't tell you how many times i've press my scroll wheel in a white background only to have window after window open up 100% unintentionally.
F.R.U.A.D.
BTW love your work reggie.
how much is your privacy and attention worth?
AAPL and GOOG are starting to find out what CSCO and MFST found out a decade ago...namely, your stock valuation is ultimately based on future growth. Once you reach a certain market saturation, a certain size, and growth levels off, then the stock price slowly fades. One of my indicators for when a company might have reached their zenith is when they start talking about the number of "potential customers in the world". AAPL salespeople and analysts have been bringing this up in recent weeks. Saying there are hundreds of millions of new customers just waiting to buy iGadgets in China and hundreds of millions in Africa who will buy IThingys. It is a sign. AAPL might have peaked.
+1
Great post.
Add Yahoo to that list. Also MySpace which was not public.
During the previous PM bull market in 1980 era, silver bulls were figuring out what Kodak stock would be worth if everyone in China used just one roll of silver-based film. What a wet dream!
Yes, "the universe is our market" is the self-delusion promoted at a top and by naifs who have never sold a nickel of anything.
Google turned all content on the web into a commodity. But web search is now a mess, when was the last time you looked past page one, and how many zombie BS sites do you see in the top 10? AAPL is booming because people want simple reliable ways to find a restaurant, book a flight, listen to a song, connect with friends...hence the Apple Apps universe. Get the stuff you want without having to venture into the wild West of the web and just get redirected to some complete BS. The apps work because AAPL is there to manage it all. Content creators love AAPL because they can again get paid. Yes it's a "walled garden" but usability is the key and people don't care if they have to pay a little.
So the pendulum is swinging away from GOOG commodified index search toward AAPL walled garden. But there's another change that will happen next: HTML5. This will allow the richness of AAPL's private party without the chaos of blind index search.
Now for retail. First Mom and Pop got bankrupted by big box retail. Then big box got owned by AMZN. Up next, however, is direct from the manufacturer straight to the consumer: buy your iPhone straight from Foxconn on the web. The Chinese just need to build some decent online brands and this will happen, AAPL is a designer but really just a marketing/brand middle man after all.
OK fanboys, waiting for your flames....
I've been using Android phones sinces the day Nexus came out. My wife converted instantly, we have pads, couple of phones each now. Everytime I buy a new device log into gmail and I have everything my contacts, docs, everything.
Now, our inlaws overseas wanted to buy an iPad for my son's birthday and asked my wife to buy it locally for him. I urged everybody to get a Samsung pad for him. The Apple "way" means I have to pay for apps. I'm sorry but I am happy to have a small advertising bar on my screen in exchange for free Angrybirds or whatever app I want to use. It seems to me the entire Apple economy is based on fleecing the guy who just does not give a damn about a dollar here and a dollar there. I refuse to pay for something on an iPad that I can get for free on Android.
So, the iPad is relegated to pretty much web browsing only, and my son spends most of his pad-time my wife's Galaxy pad to play games, watch Khan Academy, and just about everything now. He did not last very long on the Apple platform when he asks dad "can I buy Angry Birds" and I say, "no, here play with it on my phone or on mom's pad". And he asks my why I like Android, and I say "I don't like giving my money to AAPL", he said "yeah, they don't need it".....I smiled.......
Cut and paste from the press release
Anyone trashing this trailblazer is either not blazing often enough or lost $$ betting early on goog calls and aapl puts. Hes a macro guy anyway, so stop being a cheap-white-fuck and buy a subscription.
Otherwise you're no better, and likely much worse than the fuckwads who argue about the greatness of lebron with or without a title.
off topic, but pertinent to other Reggie posts on bank derivatives...
check out this graphic showing in stacks of cash the derivative exposure of the big banks
http://demonocracy.info/infographics/usa/derivatives/bank_exposure.html
More pedestrian thought: What ever happened to the (then) 54 year old creator of the Alta Vista Search engine who was hired by Google in 2003 and then summarily fired in 2004 terminating his 12 million dollars worth of stock options at the same time. The man had exemplary internal reviews, was widely respected in the industry, yet was treated like a malformed Cat by the employees of Google. He of course filed suit for age discrimination. He wanted his 12 Million bucks, not his job back. In what has to be an effort to delay justice by death, Google's crack team of "we do evil shit" attorneys delayed the case 7 fucking years. In 2011 the case finally got a hearing date set for this year.
Yeah, they do no evil.
I believe Google is about to face a host of problems. This is clearly evident in the number of additional sponsored links on every search I run. They aren't making the money they used to, so what's the answer? Add more sponsored links!
There's a limit to that formula, and they are hitting it. This isn't to say Google lacks potential in other areas. But I'm not sure people are seeing the forest for the trees. Those areas of potential won't stack up against the fact that the main revenue driver is hitting a brick wall. Maybe not today, but very soon.
It's a healthy company in a healthy (enough, for now) business. But like all other companies it is not immune to the laws of business. They are turning to old business tricks like buying businesses to boost revenue. This can work, but it has the same limitations which all other companies who engage it. We'll see. I'm not saying "Short GOOG". Far from it. But don't bet on regular massive beats like this one - I'd say you're more likely to see results similar to last quarter's, which were very good, but nowhere near expectations. In fact, half the reason results were so good this time around was because of last quarter.
Good points all. None of these megacaps are immune to the inlfuences of bad business. Google for instance added $9 billion to its liabilities last quarter - which is roughly the same as its gross profit. From a personal perspective, I find Google is less and less reliable to quickly find the searches I'm lookng for. I'm not complaining, it's still ten times better than other search engines, but this is the first time I've noticed a visible reduction in the quality of service.
google's problem is facebook. dumbass MBAs tried to maximize profit and all the engineers left to facebook or to startup a better search engine. Google founder had to step in and lead the vision again but too late to social network game.
msft is the next IBM
google is the next microsoft
facebook is the next google
and yahoo is fucked.
You're lookin through those rose tinted spectacles of yours again Reggie
hope you're being paid well to play this Jackyl & Hyde goon regards Apple v Google... even Goofball executives have more doubts than the slick you're laying down about this wheezing corporate dinosaur
never mind that Apples share price has nearly doubled in the past year you've been dissing them while singing the sun shines out of Goo's backside whose own shares have gone nowhere... your also-ran has been lapped
as Apples SP cooly lapped Googles puffing nag without a fuss you felt the pressure and spat your dummy out the pram a couple of months ago that the market "just didn't understand" you'd backed the real winner (course you did Reg, keep drinking that hopium syrum)
your 'job' isn't getting any easier waving that wilting sword of truth is it Reggie?
evil bastards
Fake Slewie.
invasion of privacy evil bastards
fake slewie bastards
The CIA's main internet tool, Google Inc. - Here you see a web photo of Google's live censoring and blocking of websites on US court corruption, by an important political refugee from the US in Belgium. I have met him, he is under the protection of the Belgian monarchy here against US threats to murder him. (I use a photo from one of his sites as my avatar on ZeroHedge, as a way of honouring him). He is a dissident, non-Zionist Jewish Sachs very much unconnected with Goldman Sachs, and Google is blocking his web work and trying to destroy him:
Live Photo: Google Inc. Caught Censoring EU Search Results (for USA - CIA)
Google Internet Censorship - Censure d'Internet par Google - Internet censuur door Google
http://www.flickr.com/photos/22325431@N05/6100668211/in/photostream
'Ex-Agent: CIA Seed Money Helped Launch Google', retired intelligence agent Robert David Steele interviewed by Paul Joseph Watson, and speaking of the CIA's Dr Rick Steinheiser and his connections with Google:
http://www.infowars.com/articles/bb/google_cia_seed_money_launched_googl...
Current case: Wikipedia and Google in the attack on Europe, trying to murder European citizens criticising the USA:
Report to the EU Parliament and the Commission of the European Union
Anti-Competition Crimes of EU Internet Monopoly Google Inc. (with CIA) and Wikipedia (with CIA), to Erase EU Journalism, to Slander and Murder EU - Polish Citizen, Writer, Journalist, Non-Zionist Jew
http://www.indymedia.nl/nl/2011/07/77181.shtml
Who was Larry Ellison working for when he created the Oracle database that Larry then started a business with?