Google Announces Fourth Quarter and Fiscal Year 2007 Results
MOUNTAIN VIEW, Calif.—(BUSINESS WIRE)—Google Inc. (NASDAQ:GOOG - News) today announced financial results for the quarter and fiscal year ended December 31, 2007. — “We're very pleased with our performance this quarter,” said Eric Schmidt, CEO of Google.
Context & Ripple Effects
Google closed out 2007 by missing Wall Street's expectations for the December quarter, and the syndicated reaction was immediate — Tech Trader Daily, Between the Lines, and others all keyed on the same admission from management rather than the headline numbers.
The quarter matters because CFO George Reyes told investors that social networking inventory is not monetizing as well as expected, a rare crack in the paid-search growth story, even as Eric Schmidt publicly said he was 'very pleased' with performance and Google confirmed its bid posture in the FCC spectrum auction with a minimum $4.6 billion commitment that secured favorable terms for an open wireless network.
First-order effects
- GOOG investors repriced the stock on a quarter that fell short of expectations, with Reyes's admission that social networking inventory underperforms forcing the company to explain — for the first time at this scale — why non-search ad inventory earns less.
Second-order effects
- Publishers and platforms sitting on social-networking ad inventory face pressure to justify lower effective pricing against search-intent ads, sharpening the contrast between Google's core auction business and everything adjacent to it.
Third-order effects
- With the confirmed $4.6 billion FCC spectrum floor and the open-network terms it secured, Google is committing earnings toward becoming a wireless infrastructure player, while the reported bidding war with Facebook for computer science graduates — flagged as driving starting salaries sharply higher — raises the fixed cost of the engineering base every large web platform competes with.
The trend: Web advertising is splitting into high-monetizing intent-based search inventory and discounted social display inventory, and the platforms that dominated search are spending their cash advantage to buy positions in the next network layer — wireless.