Google Faces Stiffer Competition As Online Advertising Goes Glitzy
GOOGLE HAS MADE SEARCHING web pages an engaging pastime, turning online direct marketing into a bold and highly profitable business.
The company's shares (ticker: GOOG) have soared nearly fivefold since its public offering in August 2004, passing the $400 mark last week. The company, with a market value of $119 billion, should soon surpass Yahoo! (YHOO) as the biggest online-ad seller. But Google could be hard pressed to sustain its enormous momentum as Web advertising goes mainstream and rivals encroach on its paid-search turf.
Competitors like Microsoft (MSFT), Yahoo! and even Google's partner, the America Online unit of Time Warner (TWX), which all have trailed in paid search, may turn out to be big winners as major advertisers move toward glitzy online branding campaigns.
Take the splashy ads Ford ran two years ago to kick off the NFL season: To promote its F-150 truck, the car maker bought spots on all the major sites, a "home-page takeover," as it's known in the business, and used software that grabbed the entire computer-screen image and shook it, says Greg Stuart, chief executive of the Internet Advertising Bureau. "It was very powerful," says Stuart. "When you throw in sound, people would think there was an earthquake."
Notes Standard & Poor's equity analyst Scott Kessler: "There's no question in my mind that mounting competition in the search-advertising segment is going to eventually restrain Google's revenue growth and margins." He expects Google's sales growth to slow from 91% this year to 64% next year, and has a Hold rating on the stock and a target of $364 -- nearly 10% below its recent price of $402.
Google has helped make fees for ads placed in Web-search results the largest chunk -- 40% -- of the projected $12 billion in total U.S. online-advertising revenues this year, according to PricewaterhouseCoopers. With ads like these, Google earns a fee for providing a single line of text linking to the advertiser's Website. The ads appear above and beside the unpaid results of many Web searches.
Google controls about 37.6% of all U.S. Internet searches, topping Yahoo!'s 29.8%, Microsoft MSN's 15.6% and AOL's 9.1%, according to comScore Networks in Reston, Va.
Deft placement of ads in those search results helped Google top Wall Street's profit estimates in the third quarter by 11%, even as the company spent 29% more on general and administrative costs than in the previous quarter to hire more engineers to make searching still more engaging and to start new business initiatives.
Now Google is digging deeper into direct marketing, even as the needs of advertisers may be shifting. The company recently unveiled a service called Google Base, which lets individuals post listings of items for sale. The goal: to help Google siphon off classified ads from newspapers and online venues such as
www.craigslist.com. But advertisers are spending up to a million dollars a pop, not for their names to be shown in search results but to fill Web pages with splashy banner ads similar to those they buy for the Super Bowl (see The Wall Street Journal, "Top Web Sites Build Up Ad Backlog, Raise Rates," Nov. 16).
That trend may continue, as more broadband Internet connections turn users' online experiences from primarily surfing and searching to one that more closely resembles watching movies and television, predicts Anthony Gennaro, an equity analyst with Principal Global Investors, which manages $153 billion and owns Google shares. "You'll see the Web blossom as an entertainment medium. If I spend eight hours in front of the Internet, I won't spend four of them searching," he says.
Display ads, now just 20% of all online ads, could take a greater percentage as interactive video becomes ubiquitous.
Although the whole online advertising pie will grow, "it may be time for the pendulum to swing back to display" after a surge in search advertising, argues Ken Mallon, vice president, product development for Dynamic Logic, part of advertising conglomerate WPP. That could give portals like Yahoo! an advantage, because analysts regard its technology for displaying ads as far more mature than Google's.
At the same time, marketers increasingly demand Web campaigns that can better measure their ads' effectiveness, says Mallon.
For example, MSN can track a user's activity across many Web pages using "cookies," small pieces of code that record each page visited. Yahoo! can do the same with its 191 million active registered users who log in to check their e-mail accounts, where it has a dominant market share.
Some analysts say Google is just getting started working on ways to track behavior with new programs such as its "toolbar" software. "Yahoo! and MSN have a huge advantage," says Charlene Li, an analyst at Forrester Research in Cambridge, Mass. "They have more registered users."
"We are now broadening our platform to allow advertisers [to] create awareness for their brand," a Google spokeswoman says in response to Barron's Online's e-mailed questions. "We are constantly working on new product and feature improvements, in response to feedback from advertisers, publishers and users."
But some cautious analysts warn that Google's shares have priced in the highest expectations for growth without properly reflecting the risk that the company could lose advertising market share.
Google's price-to-earnings ratio, based on earnings for this year, is 1.5 times Kessler's projected average annual earnings growth of 45% over the next five years. Although that price to earnings-growth ratio is about in line with the technology companies in the Standard & Poor's 500 index, Kessler thinks there's more risk to Google's future earnings growth.
Laura Martin, an analyst at Soleil Securities Group in New York, says investors in Google expect unreasonable growth as its shares price in 19% average annual earnings increases (excluding taxes, depreciation and amortization and stock-options expenses) over the next 15 years.
The online ad industry is unlikely to grow more than 15% annually over the next 10 years, she says.
Still, Google has many fans.
"Google is cheap," argues Jason Schrotberger, an analyst with Turner Investment Partners in Berwyn, Pa. "They will have at least a 40% [EPS] growth rate the next couple of years. At 40 times to 50 times next year's earnings [per share], they are quite reasonable for the fastest-growing large-cap company."
As long as Google outperforms, questions about rising spending, tougher competition and slowing growth may not amount to much. But as big brands spend more on Internet advertising and open up new opportunities for Google's rivals, investors in Google may begin to search elsewhere for opportunities. 网络广告市场群雄逐鹿 Google 欲保霸座必得一博
Google 让网页搜索成为一种令人入迷的消遣，并将其网上广告直销发展成一宗创意大胆而利润丰厚的业务。
Google 的股价自其去年 8 月首次公开募股以来上涨了 5 倍，上周已突破 400 美元大关，总市值 1,190 亿美元。预计该公司有望很快赶超雅虎 v(Yahoo!) 成为最大的网上广告销售商。但随著网络广告逐渐成为主流、竞争对手不断蚕食它所在的付费搜索领域， Google 要想保持目前的强大增长势头将承受很大压力。
微软 (Microsoft.) 、雅虎甚至 Google 的合作伙伴时代华纳 (Time Warner.) 旗下美国在线子公司目前都已涉足付费搜索领域。在大型广告用户纷纷投身网络发起广告攻势的形势下，上述公司都有可能成为大赢家。
Internet Advertising Bureau 首席执行长格里格?斯图亚特 (Greg Stuart) 举了两年前福特公司 (Ford) 在全美职业橄榄球赛期间搞的一个令人眼花缭乱的系列广告为例：为推广其 F-150 型卡车，福特公司在所有主要网站都购买了广告位（即业内人士所称的“主页接管”），然后用软件抓取整个电脑屏幕上的广告并晃动它。斯图亚特说，这波广告很有震撼力。当插入音效之后，人们还以为发生地震了呢。
标准普尔公司 (Standard & Poor) 股票分析师斯高特?科斯勒 (Scott Kessler) 说，他认为，搜索引擎广告业务领域日甚一日的竞争最终将使 Google 的业务收入增幅和利润率受到制约。他预计，明年 Google 的收入增幅将从今年的 91% 下降到 64% ，他对其股票的评级是持有，股价目标是 364 美元，较目前的每股 402 美元下跌近 10% 。
据普华永道 (PricewaterhouseCoopers) 的数字，网上搜索结果附带广告收费在美国总计 120 亿美元的网络广告业务收入中所占比例高达 40% ，而 Google 对这个比例可谓劳苦功高。这种广告的业务模式是， Google 在搜索结果页面上提供一行文字，可以链接到广告用户的网站上， Google 据此收取广告用户的费用。收费的广告出现在许多不付费的搜索结果的上方或右侧。
据 comScore Networks 的数据， Google 目前控制著美国互联网搜索引擎市场大约 37.6% 的市场份额，雅虎、微软 MSN 和美国在线分别为 29.8% 、 15.6% 和 9.1% 。
虽然三季度 Google 为增强其搜索的吸引力雇佣了更多的工程师，并增加了许多新业务，为此公司的一般性经营和管理成本较之前季度增加了 29% ，但巧妙的业务模式使其三季度利润仍较预期高出了 11% 。
眼下，虽然网上直销广告用户的需求可能变化无常， Google 仍向这一领域迈出了更大一步。该公司最近推出名为 Google Base 的服务，允许个人用户登载商品销售目录。目的是：帮助 Google 抢占传统报纸和
www.craigslist.com 等网络的分类广告市场。
但广告用户一次花费一百万美元绝不会仅仅满足于让自己的名字在搜索结果中出现，它们要用令人眼花缭乱的标语占满整个网页，就像他们为超级碗 (Super Bowl) 橄榄球赛购买的广告一样。
Principal Global Investors 的股票分析师安东尼?真纳罗 (Anthony Gennaro) 表示，随著更多网站将用户的上网体验由网络冲浪和网络搜索向观看电影和电视节目等多方位发展，上述趋势将更加明显。 Principal Global Investors 管理著 1,530 亿美元资产，持有 Google 股票。“你将看到网络作为娱乐媒介蓬勃发展起来。如果我在网络上花上 8 个小时，我不会耗费其中的四个小时来进行搜索，”他说。
随著互动视频节目逐渐普及，目前在网络广告中占 20% 的显示广告可能会有更大的比例增长。
Dynamic Logic 负责产品开发的副总裁肯?玛尔龙 (Ken Mallon) 说，尽管整个网络广告的大蛋糕将逐渐增大，但在搜索广告市场急速膨胀后，显示广告的崛起可能只是时间问题。这对雅虎等门户网站或许更为有利，因为分析师普遍认为雅虎的显示广告技术比 Google 更为成熟。 Dynamic Logic 是广告巨头 WPP 旗下公司。
玛尔龙说，与此同时，营销人员越来越需要能够更好体现其广告效果的网上推广活动。
比如， MSN 能够通过“ cookies ”（一小段记录所访问网页的代码）跟踪用户在许多网页上的活动。雅虎也可对 1.91 亿经常登陆检查电子邮件账户的活跃注册用户实现这一功能，该公司在电子信箱业务方面占据主导地位。
部分分析师表示， Google 凭借其“工具条” (toolbar) 等新程序刚刚开始跟踪消费者的行为。福里斯特研究公司 (Forrester Research) 的分析师 Charlene Li 说，雅虎和 MSN 占有很大优势，他们的注册用户更多。
Google 一位发言人在回答本刊通过电子邮件提出的问题时称：“我们目前正在拓宽平台，使广告客户能够创造他们品牌的知名度。我们根据广告客户、出版商和用户的反馈不断开发新产品，改进产品性能。”
但部分谨慎的分析师提醒说， Google 的股价已经反映了最高的增长预期，而没有考虑该公司可能丧失广告市场占有率的风险。
Google 基于今年收益的本益比是科斯勒对其今后 5 年平均 45% 的年收益增幅预期的 1.5 倍。尽管其本益比对预测盈利增长率的比率与标准普尔 500 指数成分股基本一致，但科斯勒认为， Google 未来的收益增长率面临很大风险。
Soleil Securities Group 的分析师劳拉?马丁 (Laura Martin) 说， Google 的投资者对该公司增长率的做出了不合理的预期，目前股价已经反映了今后 15 年里 19% 的年收益（不包括税项、折旧、摊销和股票期权费用）平均增长速度。
她说，互联网广告业的年增长速度在今后 10 年里恐怕难以超过 15% 。
不过， Google 仍有许多拥趸。
Turner Investment Partners 的分析师詹森?施罗特伯格 (Jason Schrotberger) 说， Google 股价不高，该公司今后两年里每股收益的增幅将至少达到 40% 。基于明年预期收益的 40 倍至 50 倍的预期本益比对一家增长速度最快的大型股公司来说非常合理。
只要 Google 的表现强于大盘，对该公司支出增加、竞争激烈和增长放缓的质疑就算不上什么。但随著知名品牌增加互联网广告支出，给 Google 的竞争对手带来新机会， Google 的投资者可能会开始寻找其它机会。
