Google Anaylyst Estimates and Q2 Earnings

There are over thirty top analysts who follow Google and make estimates about future earnings.

Have they all fallen asleep for the summer and left us with what could be the biggest estimate-to-actual earnings discrepancy in the history of Google's growth story?

The next earnings report will be released on July 19th. And the analysts are expecting lower earnings than in the preceding quarter.

The Q1 '07 earnings were $3.68 dollars per share. The analysts had underestimated this number by about 10%. And now they are collectively saying Q2 '07 earnings will be only $3.56 a share. Correct me if I'm wrong but this is probably the first time the analysts are not projecting a quarter over quarter earnings increase for Google.

Why would they come up with such a figure?

It's true that Google's growth rate has slowed down over the past five years. It's also true that the second quarter is typically one of duller growth in searches and advertising outlays. Most of the action, when it comes to Internet activity, traditionally occurs in the 4th and 1st quarters.

According to industry reports, online advertising has been relatively flat in this quarter. But these reports are increasingly irrelevant. As an example, do you think they talked to my neighbor about her ad spending this quarter? Not likely. These reports are based on surveys given to Madison Avenue type agencies. Yet this is not where the biggest growth in online advertising is occurring. The really booming growth is in tiny businesses buying ads online.

My neighbor runs a part-time wedding videography business. She tried advertising with Google ads for the first time a couple of months ago. She spent $300 per month and was amazed with the stellar results and how many new clients it has contributed. She will be a loyal Google AdWords customer for the rest of her business life, and will be sending at least $3,500 to Google every year.

My hairdresser, dentist, doctor and plumber have yet to try it. But they are losing out. They are wondering why no one is finding them in the yellow page directories any more. The local restaurants, pizza and Greek food takeout have caught on and are competing vigorously for first search page ads. The others in my city will catch on soon.

Because I know personally of a couple of businesses who have tried Google ads for the first time this quarter I have a hunch that this is not just happening on my block of the world. Local search for goods and services is getting going in earnest now and this growth curve is only in its infancy.

That together with the major deals Google has signed in the past few months, beginning with the YouTube acquisition last fall, is bound to ramp up the growth curve and will begin to be reflected in this quarter's revenues. How many page views a day from around the world for YouTube? YouTube just started placing contextual ads on their site this quarter. How big will these revenues be?

iGoogle, the customizable front search page was released halfway through this quarter. It has been a home-run, surprising and amazing even Eric Schmidt. This will likely be another substantial overall boost for Google ad views. Most of those cute front page widgets come attached with tempting Google ads. How many teeeny boppers and more sophisticated viewers can you see clicking on them?

The Google BBC partnership has also been in full swing this quarter for the first time. I see Reuters has also had Google ads on each of their pages (for the first time?) this quarter.

And we are not even mentioning the tremendous potential of the Apple iPhone and Salesforce partnerships and the proposed DoubleClick buy. These will probably not show in the revenues until Q3 and Q4.

I'm very long on Google stock. July 19th will be an exciting day.

So what do other people think? Could the financial analysts possibly be underestimating Q2 earnings by a huge percentage this time? Could actual earnings per share be as high as $4.5 this quarter?



Here's a summary of analyst estimates via Yahoo Finance.

Earnings Est	Current Qtr Jun-07	Next Qtr Sep-07	Current Year Dec-07	Next Year Dec-08
Avg. Estimate	3.56	3.72	15.12	19.25
No. of Analysts	32	32	33	31
Low Estimate	3.35	3.39	14.45	17.68
High Estimate	3.78	4.13	16.05	20.48
Year Ago EPS	2.49	2.62	10.58	15.12

Revenue Est Current Qtr Jun-07 Next Qtr Sep-07 Current Year Dec-07 Next Year Dec-08 Avg. Estimate 2.66B 2.86B 11.32B 15.38B No. of Analysts 32 31 32 31 Low Estimate 2.59B 2.73B 10.97B 13.85B High Estimate 2.74B 3.00B 11.81B 17.31B Year Ago Sales 1.67B 1.86B N/A 11.32B Sales Growth (year/est) 59.5% 53.2% N/A 35.9%

Earnings History Jun-06 Sep-06 Dec-06 Mar-07 EPS Est 2.22 2.42 2.92 3.30 EPS Actual 2.49 2.62 3.18 3.68 Difference 0.27 0.20 0.26 0.38 Surprise % 12.2% 8.3% 8.9% 11.5%

EPS Trends	Current Qtr Jun-07	Next Qtr Sep-07	Current Year Dec-07	Next Year Dec-08
Current Estimate	3.56	3.72	15.12	19.25
7 Days Ago	3.56	3.72	15.12	19.25
30 Days Ago	3.40	3.58	14.31	18.40
60 Days Ago	3.40	3.58	14.25	18.43
90 Days Ago	3.39	3.58	14.25	18.42

Google Apple Partnership Rumors are Building

Apple's iPhone will hit the stores on June 29th. Is there a top secret announcement that will accompany the launch? I think so. And a lot of other people are speculating about this. We may see a Google Apple partnership that could be a big blow to the future of Microsoft.

See some discussion about this here and here.

Here's a comment someone left on the above post that sums it up very well;

Everybody's missing the point. If Apple succeeds in making the 'widget' the standard app delivery service for cell phone usage, then they can succeed in delivering the first mass-market entirely web-based computing platform. That is huge. iPhone widget development will become the whole game. Now Google apps also have some hardware to live on where they (hopefully) get adopted as a new standard for document exchange. If it works, then Microsoft is no longer anywhere in the picture of the future of personal computing devices and of the most innovative channels of software delivery. This is going to be very interesting...

First TV Station Deal with Google

A television operator has just signed a deal with Google to place their content on YouTube and share advertising revenues with Google.

Hearst-Argyle Television has local stations in Boston, Manchester, N.H., Sacramento, Calif., Pittsburgh and Baltimore. They will post local video content to dedicated YouTube channels.

"This innovative deal with Google and YouTube fits perfectly within our overall digital strategy of distributing our content on all three screens - the TV, the PC and the mobile phone," Terry Mackin, executive vice president of Hearst-Argyle, said in a statement.

Is this the door opening to the floodgates of other TV stations around the world who will start to see the benefits of such a deal with Google?

Google TV is here.