Google Earnings: Three Things to Watch For Despite the Impressive 2Q Results

Google Inc.’s earnings in the second quarter of this year were way more than what was expected, even by the company itself. The internet search giant reported massive revenue increases with impressive performance indexes in the second quarter in both its core and other businesses.

Earnings Beat Expectations

With an average 6.52 dollars in earnings per share on its revenues of about 4.98 billion dollars, minus its traffic acquisition expenses, the company’s earnings were nothing but impressive. Google’s earnings were way more than what the general consensus had hopped the company would generate in 2010. When it last outperformed general expectations in terms of profits and revenues, its shares went off like nothing, with sales peaking an all time high. That was in the first of 2010 and from thence, the search giant has seen its shares decline by a margin of 13.5 per cent. The result of this impressive performance yet declining share prices has gotten people talking if the company can still cut it out as a growth stock. Concerns are beginning to grow stronger by the day over issues such as its growth potential given factors such as its stand off with the Chinese government over censorship issues, the intense regulatory scrutiny it has come under in Europe and the US, concerns over its capacity to rack in revenue from the mobile web. With that in mind, there are certain things you need to watch out for as things unfold.

Paid Clicks and Cost Per Click

First of all, you need to keep your eyes on Google’s paid clicks. Paid clicks simply connotes the number of clicks are made on Google ads by users and this will be crucial in determining if the search giant will maintain its growth trajectory in its main business that is internet search. The company did report Thursday that its paid clicks went up by a margin of 15 per cent in 2010 when compared with that of 2009. However, that percentage growth of paid clicks in 2010 is similar to the company’s growth in 2008.

The second you need to keep your eyes on is the Cost per click growth rate of the search giant. In this regard, the company’s cost per click went up by a margin of 7 per cent in 2010 when compared to that of last year. However, the same cost per click growth rate peaked at 5 per cent as its year to year growth rate for the fourth quarter. Watch keenly to see what becomes of this figures as anything less will signal a negative trajectory.

Ex-Traffic Acquisition Costs

Finally, the third thing you need to look out for is the search giant’s ex-traffic acquisition costs. Seeing as it is that its investors would very much like to see the company get higher sales, watch out for the company’s revenues minus the traffic acquisition costs. The traffic acquisitions costs simply denote the revenue Google shares with the other sites it partners with in its businesses, particularly ads.

You will remember that even after registering an impressive 23 per cent growth increase in the last quarter, way up from that recorded in the same period in 2009, investors were still grumpy and slod off shares.

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