Thursday, October 18, 2012

Google Has a Terrible Horrible No-Good Very Bad Day


Today Google "accidentally" released some type of earnings report that wasn't even edited, and the market responded in a such a bad way that Google trading was halted for at while, plus it pulled the total tech stock market into the dumps. What is going on here? 

From Bloomberg
Trading in Google’s stock was halted at about 12:50 p.m. New York time, and resumed at 3:20 p.m. after the company released a finalized version of its earnings document. The company said R.R. Donnelley (RRD) & Sons Co. released a draft of the quarterly results without permission. Google tumbled 8.1 percent to $694.01.

The company’s profit and sales missed analysts’ estimates, a sign that Google’s tools are becoming less valuable to advertisers while costs associated with expansion into new businesses are chipping away at profitability. The average amount advertisers paid each time a user clicks on a promotion declined about 15 percent from a year earlier, and was 3 percent less than the prior period.

From BuzFeed
Google makes virtually all of its money from contextual advertising in its own products, such as search and Gmail, and through partners that use its ad product, AdWords. That entire business model is based on the value of user clicks. (I click an ad in Gmail, Google gets a penny. I click on ad on a website that uses Adwords, the site owner and Google each get a half a penny. Repeat billions of times.)

The value of those clicks is going down, and there's no reason to believe it will go back up: this type of unintelligently targeted advertising is not popular on social networks, which are luring away advertisers, and AdWords specifically has no place on social networks that Google doesn't own.

This is a startling reminder that no tech company's position, no matter how towering, is permanent. And a clear illustration of why Google has been so, so insistent on making Google+ work, even to the detriment of its current, non-social users.

CNBC Story: Google Earnings, Revenue Miss Wall Street Forecasts
Following the earnings release surprise, the company issued a statement blaming its financial printer for the early release.

"Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorization. We have ceased trading on NASDAQ while we work to finalize the document. Once it's finalized we will release our earnings, resume trading on NASDAQ and hold our earnings call as normal at 1:30 PM PT," the company said.

A spokesman for RR Donnelley said: "We are fully engaged in an investigation to determine how this event took place and are pursuing our first obligation – which is to serve our valued customer."

Google posted third-quarter earnings excluding items of $9.03 per share, down from $9.72 a share in the year-earlier period.

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