Apr 28, 2008

Google's Evolving Strength In International Mkts

Recently, Google published it’s much anticipated quarterly results. A few key points struck me about the Q1 Results (full details outlined below).
- Revenue totaled $5.19 billion YoY increase of 42% & 7% stronger than Dec’07 figures. So even in the midst of a “recession” in its largest market – Google managed to grow revenue
- TAC totaled $1.49 billion: 9% of advertising revenues, and it's declining....

- Strong Q1 revenue results of $5.2b or 42% QoQ growth
- International Revenue increased from 47% to 51% of total revenue.
- AdSense Revenue is up 25% over last quarter and Paid Clicks are also up 20%
- Net income for the first quarter of 2008 was $1.31 billion as compared to $1.21 billion in Q4 of 2007 (8%)
- Google Sites Revenues hit $3.40 billion, or 66% of total revenues, YoY growth of 49% increase and 9% over Dec ’07 figures

Global Domination Is Not A Far Fetched Prospect
Google stays ahead of the game by paying attention to what’s important – driving core relevance improvements in both algorithmic search and sponsored (paid) listings. It’s admirable that Google dominates the Internet Landscape in the United States. However, I’m even more impressed by its strong foothold in key European Markets and it’s growing influence in the very competitive Asian Pacific Mkts.

I marvel at the progress Google has made in Japan, China, South Korea and India – against strong local players with all sorts of intangible advantages. At core is the unparalleled effectiveness of PageRank in providing market specific relevance, across diverse markets with very different languages. The use of Universal / Blended Search in S/Korea and Japan and the focus on Music Search in China – are smart, strategic initiatives. As is, the proliferation of Mobile Search and Mapping functionality in regions where PC sales are dwarfed by those of Mobile applications. Even the purchase of Youtube, though unlikely to ever be ROI positive, has enabled Google to further strengthen the ubiquity of Video Search, across different platforms.

Revenue from Intl Mkts hit 51% of total revenues, for the first time. UK alone accounted for $803 million. Google already generates Billion’s each quarter from European and S/American Mkts – It stands to gain even more once it’s only real competitor (YHOO), starts using adwords in key markets. Microsoft’s adCentre is the only other monetization platform which may have the resources to challenge Google – but without a strong presence in Key Global Mkts – it will likely cede Intl Search Business, to Google. (unless of course, it can buy Yahoo and revitalize Panama J).


Q1 Financial Summary
Google's results for the quarter ended March 31, 2008, include the operations of DoubleClick Inc. from the date of acquisition, March 11, 2008, through the end of the quarter, and are compared to pre-acquisition results of prior periods. The overall impact of DoubleClick in the first quarter of 2008 was immaterial to revenue and only slightly dilutive to both GAAP and non-GAAP operating income, net income and earnings per share.

Google reported revenues of $5.19 billion for the quarter ended March 31, 2008, an increase of 42% compared to the first quarter of 2007 and an increase of 7% compared to the fourth quarter of 2007. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs, or TAC. In the first quarter of 2008, TAC totaled $1.49 billion, or 29% of advertising revenues.Google reports operating income, net income, and earnings per share (EPS) on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures in the accompanying financial tables.

GAAP operating income for the first quarter of 2008 was $1.55 billion, or 30% of revenues. This compares to GAAP operating income of $1.44 billion, or 30% of revenues, in the fourth quarter of 2007. Non-GAAP operating income in the first quarter of 2008 was $1.83 billion, or 35% of revenues. This compares to non-GAAP operating income of $1.69 billion, or 35% of revenues, in the fourth quarter of 2007.

GAAP net income for the first quarter of 2008 was $1.31 billion as compared to $1.21 billion in the fourth quarter of 2007. Non-GAAP net income in the first quarter of 2008 was $1.54 billion, compared to $1.41 billion in the fourth quarter of 2007. GAAP EPS for the first quarter of 2008 was $4.12 on 317 million diluted shares outstanding, compared to $3.79 for the fourth quarter of 2007 on 318 million diluted shares outstanding. Non-GAAP EPS in the first quarter of 2008 was $4.84, compared to $4.43 in the fourth quarter of 2007.

Non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP EPS are computed net of stock-based compensation (SBC). In the first quarter of 2008, the charge related to SBC was $281 million as compared to $245 million in the fourth quarter of 2007. Tax benefits related to SBC have also been excluded from these non-GAAP measures. The tax benefit related to SBC was $51 million in the first quarter of 2008 and $42 million in the fourth quarter of 2007.

Reconciliations of non-GAAP measures to GAAP operating income, operating margin, net income, and EPS are included at the end of this release. Q1 Financial Highlights Revenues – Google reported revenues of $5.19 billion for the quarter ended March 31, 2008, representing a 42% increase over first quarter 2007 revenues of $3.66 billion and a 7% increase over fourth quarter 2007 revenues of $4.83 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

Google Sites Revenues - Google-owned sites generated revenues of $3.40 billion, or 66% of total revenues, in the first quarter of 2008. This represents a 49% increase over first quarter 2007 revenues of $2.28 billion and a 9% increase over fourth quarter 2007 revenues of $3.12 billion.

Google Network Revenues - Google’s partner sites generated revenues, through AdSense programs, of $1.69 billion, or 33% of total revenues, in the first quarter of 2008. This represents a 25% increase over network revenues of $1.35 billion generated in the first quarter of 2007 and a 3% increase over fourth quarter 2007 revenues of $1.64 billion.

International Revenues - Revenues from outside of the United States totaled $2.65 billion, representing 51% of total revenues in the first quarter of 2008, compared to 47% in the first quarter of 2007 and 48% in the fourth quarter of 2007. Revenues from the United Kingdom totaled $803 million, representing 15% of revenue in the first quarter of 2008, compared to 16% in the first quarter of 2007 and 14% in the fourth quarter of 2007.
Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 20% over the first quarter of 2007 and approximately 4% over the fourth quarter of 2007.

TAC - Traffic Acquisition Costs, the portion of revenues shared with Google’s partners, increased to $1.49 billion in the first quarter of 2008. This compares to TAC of $1.44 billion in the fourth quarter of 2007. TAC as a percentage of advertising revenues was 29% in the first quarter, compared to 30% in the fourth quarter of 2007. The majority of TAC expense is related to amounts ultimately paid to our AdSense partners, which totaled $1.34 billion in the first quarter of 2008. TAC is also related to amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $143 million in the first quarter of 2008.

Other Cost of Revenues - Other cost of revenues, which is comprised primarily of data center operational expenses, credit card processing charges as well as content acquisition costs, increased to $624 million, or 12% of revenues, in the first quarter of 2008, compared to $516 million, or 11% of revenues, in the fourth quarter of 2007. Pursuant to our acquisition of DoubleClick, we allocated $862 million to identified intangible assets, which have a weighted average useful life of 6.3 years.Operating Expenses - Operating expenses, other than cost of revenues, were $1.53 billion in the first quarter of 2008, or 30% of revenues, compared to $1.43 billion in the fourth quarter of 2007, or 30% of revenues. The operating expenses in the first quarter of 2008 included $809 million in payroll-related and facilities expenses, compared to $756 million in the fourth quarter of 2007. Stock-Based Compensation (SBC) – In the first quarter of 2008, the total charge related to SBC was $281 million as compared to $245 million in the fourth quarter of 2007.

We currently estimate stock-based compensation charges for grants to employees prior to April 1, 2008 to be approximately $1.1 billion for 2008. This does not include expenses to be recognized related to employee stock awards that are granted after April 1, 2008 or non-employee stock awards that have been or may be granted. We currently anticipate that dilution related to all equity grants to employees will be at or below 2% this year. Operating Income - GAAP operating income in the first quarter of 2008 was $1.55 billion, or 30% of revenues.

This compares to GAAP operating income of $1.44 billion, or 30% of revenues, in the fourth quarter of 2007. Non-GAAP operating income in the first quarter of 2008 was $1.83 billion, or 35% of revenues. This compares to non-GAAP operating income of $1.69 billion, or 35% of revenues, in the fourth quarter of 2007. Net Income – GAAP net income for the first quarter of 2008 was $1.31 billion as compared to $1.21 billion in the fourth quarter of 2007. Non-GAAP net income was $1.54 billion in the first quarter of 2008, compared to $1.41 billion in the fourth quarter of 2007.
GAAP EPS for the first quarter of 2008 was $4.12 on 317 million diluted shares outstanding, compared to $3.79 for the fourth quarter of 2007, on 318 million diluted shares outstanding. Non-GAAP EPS for the first quarter of 2008 was $4.84, compared to $4.43 in the fourth quarter of 2007.

Back On The Block

Just back after a lengthy lay off. For a while, I didn't feel a strong urge to write. I've been doing a lot of travelling - Asia, Europe and most recently - back home to Nigeria. It's good to be back and I'm gradually rediscovering my enthusiasm to write - and hopefully, change and affect the World, in my own little way.

Apr 4, 2008

The Evoloving Internet Landscape - Volume I

Summarizing the current overiding trends in the Online Advertising Industry - today.

Apr 2, 2008

Thanks For The Published Comments

I'd like to thank those individuals who published comments recently, on my blog. I truly appreciate your feedback and suggestions, particularly the kind words about my picture.

Thanks Again,


World Changer.....

The Are of the Start

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