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Do you really believe that a company that makes the majority of its income from advertising will hold its value through one of the worst recessions were facing

by kirse 18y ago

Do you really believe that a company that makes the majority of its income from advertising will hold its value through one of the worst recessions were facing in a long time? There's going to be some major spending cutbacks across the board over the next couple years because there HAS to be (from people to business to government), and advertising/marketing is going to be at the top of the list. There is a fundamental shift in the economy right now - credit is drying up and people are going into conserve and save mode. There's no way in hell Google will have a $15 EPS two years from now, you can put this post in your calendar for October 2010. So yes, when Google's EPS is something like $1.50, it will make a ton of sense when they're trading at $40-50. Unless they've got some mysterious source of income, advertising is going to suffer horribly in this recession and so will the companies that depend on it.

SwellJoe 18y ago
Do you really believe that a company that makes the majority of its income from advertising will hold its value through one of the worst recessions were facing in a long time? Umm...yes? But, at least you're making a little sense now. I don't believe they will lose as much revenue as you think. Marketing does decline in a downturn--but it also retreats to quality (i.e. the overall ad spend declines, but what is spent is refocused on the best performing tools). And AdWords is among the absolute best bang for your bucks advertising model available. Anybody that's doing even basic metrics will know that (I advertise on a half dozen different networks, and AdWords is pretty much the head and shoulders best performer, and in response to that knowledge I've increased AdWords spend, and decreased spend with folks like AdBrite and Yahoo). Also, the downturn will hit smaller advertising networks much harder than Google, who have huge cash reserves. Google will survive. Many of its competitors will not. So, the number of places companies can advertise is going to get smaller, possibly a lot smaller. So, while I agree that everything is going to see cuts, including marketing, I don't think it's going to just stop. As long as a company is in business, it must be marketing, or it'll die soon after. If you aren't reaching people every day, you can't survive. Cuts will happen, and some of Googles customers will die off, but marketing spend isn't going to dry up any more dramatically than other aspects of the economy--maybe less so, since it is core to making money. And companies really want to make money now. So, long-term, I'm still bullish on Google. Particularly if the stock price continues to drop. I should probably shake down some of my friends at Google for hints on how much impact this is really going to have on their bottom line...but I'm kinda running on gut feeling right now. So, I could be wrong, and you could be right. I'm not betting any money I can't afford to lose, but I'd certainly like to win rather than lose.

by kirse 18y ago

SwellJoe 18y ago

Do you really believe that a company that makes the majority of its income from advertising will hold its value through one of the worst recessions were facing in a long time? Umm...yes? But, at least you're making a little sense now. I don't believe they will lose as much revenue as you think. Marketing does decline in a downturn--but it also retreats to quality (i.e. the overall ad spend declines, but what is spent is refocused on the best performing tools). And AdWords is among the absolute best bang for your bucks advertising model available. Anybody that's doing even basic metrics will know that (I advertise on a half dozen different networks, and AdWords is pretty much the head and shoulders best performer, and in response to that knowledge I've increased AdWords spend, and decreased spend with folks like AdBrite and Yahoo). Also, the downturn will hit smaller advertising networks much harder than Google, who have huge cash reserves. Google will survive. Many of its competitors will not. So, the number of places companies can advertise is going to get smaller, possibly a lot smaller. So, while I agree that everything is going to see cuts, including marketing, I don't think it's going to just stop. As long as a company is in business, it must be marketing, or it'll die soon after. If you aren't reaching people every day, you can't survive. Cuts will happen, and some of Googles customers will die off, but marketing spend isn't going to dry up any more dramatically than other aspects of the economy--maybe less so, since it is core to making money. And companies really want to make money now. So, long-term, I'm still bullish on Google. Particularly if the stock price continues to drop. I should probably shake down some of my friends at Google for hints on how much impact this is really going to have on their bottom line...but I'm kinda running on gut feeling right now. So, I could be wrong, and you could be right. I'm not betting any money I can't afford to lose, but I'd certainly like to win rather than lose.