Tuesday, April 15, 2008

Google: Wall Street's Favourite Target?

Reports starting to appear (e.g. here) that Google's paid-click traffic growth in March declined precipitously once again.

Consensus earnings estimates were already cut following-on from January's surprise drop in year-on-year click-through growth. However, even those numbers will be seen as optimistic if Google hasn't been successful in doing what it said it was doing which was to increase revenue per click, aka quality.

It's going to be an interesting earnings season because the outcome here for Google will be seen as somewhat binary, but with little upside regardless. Either Google has indeed improved the quality of the clicks it has seen, in which case the Street will be somewhat mollified and will hang tight for another quarter to see what happens, or it hasn't and the macro-economic climate will doubtless be blamed, eliminating the "safe haven" allure that Google's stock price has had up until now, in which case the stock will drop like a trader from a 20th story window.

There will be many on Wall Street shorting that one, because there's big-bucks to be made if they call it right regardless of how far it actually falls. Unless the news is relentlessly good, pretty much everyone will be taking pot-shots at Google from now until the next chance to see the actual numbers three months further on. This could get ugly .... really ugly, and not just for Google.

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