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Let me see if I've got this right. TL;DR: you worked at Google where they said average CPC was important and you worked on a search related startup that sold r
by ariwilson 11y ago
Let me see if I've got this right.
TL;DR: you worked at Google where they said average CPC was important and you worked on a search related startup that sold relabeled Google ads (presumably through the AdSense for Search program?) where Google paid some contractually fixed fraction of revenue on searches (revenue on these searches is not necessarily correlated with revenue on main Google search, correct?). At this startup, they wouldn't let you resell these ads for mobile searches because it would hurt margins (seems like shaky reasoning to me, who doesn't like more money / more profit?).
Then a smattering of recent news stories with tangential relationships to your main thesis about margins (YouTube (when have the margins been broken out on this?), Android (not sure how this fits into your narrative about the decline of Google's growth)) mixed in with some real medium term competitive threats (EU, Facebook/Bing (didn't FB used to redirect their search traffic to Bing? not sure that made much of a difference)).
Here's some alternative narratives:
a) There's far more to profitability on online advertising than average CPC, like query mix as I mentioned before. Additionally, advertising on Google owned & operated properties have been continually far more profitable and growing at a much faster pace than relabeled search advertising or AdSense on third party websites. Google has refocused their engineering / sales efforts on advertising products on their owned & operated properties and de-emphasized properties like Blekko.
b) Google's PE ratio has gone from <20x in 2010 to >30x today. The market believes Google's growth prospects are brighter than ever.
To summarize, I also keep a careful eye on Google / other tech company's financials and how they relate to both my personal work and larger trends in the industry as a whole. I simply disagree with your theses that a) search engine margins are decreasing and b) that the search engine business needs to grow at a faster rate for Google to continue to grow sustainably due to a) the continued power of direct response search advertising and b) other growth areas like video, brand, mobile, and new markets.