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Monday, March 31 2008 @ 07:16 AM Central Daylight Time
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A comScore report has indicated, for the second straight month, that search engine giant Google's revenue engine is slowing down, highlighting again the perils of the company's overwhelming dependence on a single type of online advertising to fuel its business.
The report is available only to comScore clients, but a comScore spokesman said that its findings are accurately rendered in a note authored last week by Citigroup analysts Mark Mahaney and James Samford.
A key takeaway from the Citigroup analysts: In February, clicks on Google's U.S. search ads grew only 3.1 percent year-on-year. Considering that February had 29 days, the growth rate would probably have been flat without the extra day, Mahaney and Samford wrote.
Coupled with a 0.3 percent year-on-year decline in January, also per comScore, a trend is emerging that Google's pay-per-click (PPC) ad business may be losing steam, after powering the search giant to mindblowing levels of revenue and profit growth for years.
While the news is of concern mostly to investors, it is also of interest for companies investing in Google's enterprise software products, like the fee-based version of the Google Apps suite and the Google Search Appliance. This is because the robust growth of Google's PPC ad business is what has allowed the company in recent years to fund its endeavors in enterprise search and hosted collaboration and communication suites.
Should the PPC business slow down significantly, it will be interesting to see how that may affect Google's investment in its enterprise software unit, which generates a small percentage of the company's revenue.
Vanessa Arellano Doctor
http://jump2top.com
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