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Thursday, July 21, 2005

Search Engine Corporate:: Google and Microsoft Revenue Up, Yahoo! Revenue Down

Posted by @ 10:02 pm

Google and Microsoft have both announced increase in their profits and revenues for the fourth quarter. Yahoo! saw increased profit but failed to meet analysts expectations on revenue growth.

Microsoft has increased profit by 37% (to $3.7billon) with an increase of 9% in revenue (to $10.16billion). The growth of Microsoft has been fueled by all divisions increasing sales. Microsoft has many divisions including:

  • Office
  • Windows;
  • Server products;
  • Xbox; and of course
  • MSN

Microsoft growth is largely software based and they are yet to capitalize on their huge investment in search. MSN revenue is due to advertising and revenue share with Overture.

Contrast this with Google, which saw record revenue of $1.384 billion for the quarter. Over 53% of Google’s revenue came from Google owned sites. The Google network contributed 46% of revenue. The network includes Ask Jeeves and AOL, where Google Ads are shown and also the Google Adsence network.

Effectively 99% of Google’s revenue came from a single product line, unlike Microsoft’s.

Yahoo!! Announced revenues of $875million, falling some $7 million short of expectations. Earnings exceeded expectations but with a cautionary note. With Google growing so much in the same period and a proven history of over performing, the Yahoo! share price is expected to be hit hard.

To counter act this Yahoo!’s CEO and Chairman Terry ry Semel announced that Yahoo! would try to leverage the growth in search engine ads and “branded messages” by conducting an overhaul of it’s search advertising technology later this year, to make it more valuable to advertise. This is an effort to attract a greater percentage spend of the advertisers dollar on the Yahoo! network.

The fear must be there for Yahoo! that when MSN release their own paid search product a huge amount of revenue will be lost. This will undoubtedly put pressure on the share price and make the investors nervous.

Whilst Google’s growth is amazing, surely this can not be sustainable in the long term. With Microsoft also aiming squarely at Google, the pressure to continue this revenue growth will be huge.

Microsoft – on the other hand – have many different independent revenue streams and a large bank balance to challenge Google. With a bold call of “returning to double digit growth in 2006″ Microsoft will be going hard to tackle all it’s competitors in all markets. I can see MSN being extremely aggressive in the next 12 months as the search strategy starts to become more apparent.

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