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You are here: Home / News / Advertising – Google’s Achilles Heel

Advertising – Google’s Achilles Heel

by Matt Fields

For years, industry analysts and investors have been raising concerns over the dependence of Google’s business model on ad revenue. With the widespread growth of social media and changes in the way people use the web, new questions are being raised about Google’s dependence on ad revenue and if it will turn out to be the company’s Achilles heel.

The Source of Doubt

Google’s lower than expected earnings reported in Q4 of 2011 amplified existing concerns about the search giant. To make matters worse, Google also reported an 8 percent decline in the cost per click rates from 21. The lower than expected earnings, as well as other existing concerns surrounding Google, resulted in a 9 percent loss in stock value after the earnings report came out in Q4.

Google’s 2012 Q1 earnings report shows revenues up 24 percent from last year. Google also announced the creation of a new class of non-voting stock that would be used to implement a 2-1 stock split.

Recording of 2012 Q1 Earnings Call

Google’s position as the leading smartphone OS coupled with mobile advertising revenues in the US expected to reach $2.61 billion up from $1.45 billion in 211 and $796.6 million in 211 highlight that Google’s dependence on ad revenue could be misplaced.

Even with changes in how people use the web, and the increasing importance of social media sites, Google’s dominance in mobile looks to secure its position as a leader in display advertising and address concerns about the company’s business model.

What do you think? Is the dependence on ad revenue going to be Google’s Achilles heel?

Filed Under: News

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