Google in Wall St. Matrix: Faces Red or Blue Pill Dilemma


The message from Wall St. to Google rang as clear as the opening bell today. Unfortunately for Google, it was finally “For Whom The Bell Tolls.”

After hours, Google found itself in a Matrix of its own making. Analysts played the role of Morpheus to Eric Schmidt’s Neo:

This is your last chance. After this, there is no turning back. You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill – you stay in Wonderland and I show you how deep the rabbit-hole goes.”

The blue pill: Google starts giving guidance to Wall St. and manages expectations. The red pill: have it your way and suffer the slings and arrows of analysts who project exponential growth. Let’s face it, it’s tough for investors to read the tea leaves.

Look for Google stock to yoyo as investors try to figure out what’s behind the deceleration in growth. Mary Meeker received some Homer Simpson-style credit for noting paid search revenues were at the core of Google’s problems. D’oh Henry.

Google posted revenue growth of 51% Y/Y and 14% Q/Q with Google properties revenue revenue growth up 58% Y/Y and 14% Q/Q.

Google stated property revenue growth (+58% Y/Y) was driven by “strength in the holiday retail season.” We’ll look closer at what’s really driving Google revenue growth in the coming days. Battelle summed it up: Google…Disappoints.

Google network revenues increased 37% Y/Y and 12% Q/Q. Strong international performance, with $2.3 billion in Q4 international revenue.

Google has added some “dots” to their new slogan: now, “Search.Ads.Apps Strategy.” The Street feels they’d be better off dotting their i’s and crossing their t’s in executing on social media / social search strategies.

Google ecosystem numbers were healthy. Good for the rest of the Internet; not as good apparently for Google. Traffic Acquisition Costs, revenues Google shares with partners in the Google ecosystem jumped to $1.44 billion in the fourth quarter of 2007. Last quarter, TAC of $1.22 billion in the third quarter of 2007.

TAC as a percentage of advertising revenues was 30% in the fourth quarter, compared to 29% in the third quarter of 2007.

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