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October 17, 2006

Is Google Slowing?

posted by MR WAVETHEORY at 10/17/2006 10:33:00 AM
While doing some reading, I came across Amr's post that Google Is Slowing. Amr works at Yahoo! and cites the following reasons:
  1. Once you have tons of revenue, its hard to keep high Year-over-Year (YoY) growth rates
  2. The search marketplace is slowing down a bit due to saturation in the US and European markets (still plenty of growth in Asia though, but Yahoo is stronger there).
  3. Google (Nasdaq GOOG) launched almost all the tricks in the bag during 2003, 2004 and 2005, the only remaining tricks are visual placement tricks and looser matching (i.e. more, less-relevant, ads on top of web results).
  4. None of Google’s other products, other than web search that is, have decent “money” marketshare. Google’s Image Search is actually pretty large, but they have no ads there (will that change in Q3? possibly).
He also has a nice graphic showing the declining sequential growth rate (courtesy of Amr).

Quarter Seq Growth YoY Growth
2004 Q3 15.00% 105.00%
2004 Q4 28.00% 101.00%
2005 Q1 22.00% 93.00%
2005 Q2 10.00% 98.00%
2005 Q3 14.00% 96.00%
2005 Q4 22.00% 86.00%
2006 Q1 17.00% 79.00%
2006 Q2 9.00% 77.00%
Particularly interesting is that Amr states,

Don’t expect this strong growth for 2005-Q3 to repeat again for 2006-Q3, it will be lower, much lower (unless if Google increases the ads above web results or start monetizing one of their other large products). In fact, I expect the summer impact to be larger on Google since they have more share of students and schools.

I would also like to point out that just last week, Viewpoint (Nasdaq VWPT), a small search company, announced weakness in its search business, which confirms weakness in the auto vertical that Yahoo! Inc (Nasdaq YHOO) warned about earlier.
Viewpoint Corporation, a leading internet marketing technology company, today announced that it has lowered its guidance outlook for the Company's 2006 financial performance primarily as a result of a softness in ad spending and customers' product delays.

The Company also expects that it will be taking a non-cash Goodwill impairment charge in the quarter for its Services segment, which was also significantly impacted by the softness from automotive customers.

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