Peter Kafka

Recent Posts by Peter Kafka

How Bad Did Search Ads Get Hit Last Quarter? Time to Ask Google.

Search advertising was supposed to be the one sector of the marketing world that wasn’t going to get creamed in a recession. So was it?

Depends on who you ask: Search ad firm Efficient Frontier says spending dropped eight percent in the last quarter of 2008. But search ad firm Clickable says it saw “marginal” increases during the same period. You can easily find more conflicting data with a couple mouse clicks.

Here’s the easy way to settle this up: Check with Google (GOOG) today after 4 p.m. EST.

The search ad giant reports its fourth-quarter 2008 earnings today, and Wall Street is expecting earnings of $4.96 per share on revenues of $4.12 billion. [UPDATE: Google beat those estimates in what appears to have been a very good quarter, all things considering]

Below, a handy “cheat sheet” from Citigroup’s (C) Mark Mahaney that sketches out what Wall Street and Citi are looking for from Google in more detail (click to enlarge). Note that Mahaney is painting a mixed picture for Google (and thus, search in general): an increase in the overall dollars spent on search (paid click growth), but a decrease in the amount spent on each ad (cost per click growth).

Beyond the Q4 numbers, it’d be great to get color from Google execs about the current market (Google famously doesn’t offer formal earnings “guidance”) and the state of projects like YouTube, etc. But if you’re really impatient, no need to wait until this afternoon to get a sense of how Google has been doing: Just look at the company’s track record over the past few months.

Google has finally started trying to wring extra pennies out of each visitor (via efforts like its YouTube affiliate program), while actually cutting nonperforming projects (like its Print Ads program). And this month it made an unprecedented move: firing full-time employees.

Translation: Google is still an awesome money-making machine–it’s going to have an operating margin of nearly 50 percent for the last quarter, and will have posted more than $5 billion in profit for 2008. But it isn’t immune to a worldwide meltdown, and search ads aren’t either.