Google's Investor and Analyst Conference Call
This is entirely in notation format, so please understand any lower casings that should be upper case and vice versa may not be formatted properly because of it being notation. Also please forgive any minor typos ahead of time.
At 2:00 PM EST Google (GOOG-NASDAQ) initiated its investor and analyst call.
It was all Q&A, but they said up front that they would not answer quarterly performance and that they will not offer financial guidance. I put in the firm name when applicable but some where hard to hear because of static.
on the AOL partnership......AOL deal signed a little over a month ago and took place today...they provide search services to AOL. so far everyone is pleased with the deal. Will add a mechanism where the Instant Messengers could add Google Talk. Said Nokia and RIMM ramping to include Google Talk too.
on CAPEX....they get advantage by building their own infrastructures (supercomputers in data centers). numbers are large but they look for additional performance out of what they build as opposed to renting their capital equipment (said renting is not an option)
on product development.....asked if they would single out the winner and loser.....biggest success was the keyhole of ads to mapping and satellite integration as well as building out the local ad information other than just yellow page equivalent......they said their off-line print has been nascent and they think the format and content working has been a laggard compared to their hopes.
on clickthru rates......ranking algorithims use keyword purchasing and targeting.....display ads being tested to see if people are really responding or not so they can make the current model even better......did say their high quality shopping is not really a takeoff of an Amazon or eBay system on payments as it is more advertiser-targeted
UBS asked about the Dell deal.......goog says they are ecstatic but there are not any barter deals for hardware.....they wont go into financial or contract details of the DELL deal b/c of confidentiality.....also asked if they will be hiring more than last year and they said they are looking to hire the best and brightest in each field and lower job postings shouldnt be read into.....
CSFB asked more on CAPEX about real estate......at the rate of headcount growth they have to keep pace and try to get more real estate that is in the same geographic area.....bought some properties to redevelop in Mountain View and Bay areas........when asked on municipal wi-fi in Mountain View and other impacts it can have on the business......they know that users that switch up to broadband are much wider users of Google....said it isnt a requirement taht Google does all of this nationwide and globally but it is important that Everyone do it......large urban development wifi initiatives are going to require more partners than just Google because of the vast demands in each local effort.....said partners are bearing much of the physical equipment costs so it is good for Google
on Google potentially building a Browser........said they have active partnership with Firefox, said Safari is good in Mac space and that the consumer has enough browser choices because of these and opera and others......the implication is that there is not a need for GOOG to build their own browser
on Best Buy and other searches...........Best Buy efforts just getting started as they expand local and w/ click to call....on Base and Yellow Pages they are working with may providers and lauched local AD WORD STARTER EDITION to get their campaigns started.....local is becoming significant component of their business.....
ThinkEquity.....asked about valuing content strategy......right now they don't offer broad ramming products that they see demand for and they want to but havent figured out how to build it yet, working on it for the next year w/ hopes of finding more.....they added demographic site collections similar to what movie studios have done prior to DVD and movie launches.
Piper Jaffray......asked about Google Base on traction and listings, but harder to see if it is living up to user adaption: Google said they use Google Base to blend search results into Google search experience.....they dont see it as a large separate site but more as another point within Google like Froogle was 2 years ago.....wants to offer more integration and that it will lead to higher traffic overall......they are going with more "refinement boxes" on things like recipe searches and will integrate these in other searches around Base and maybe others......also PJ asked about difficulty in gaining ground on search in China.....Google said they havent seen the need to segregate the Chinese user from the rest of the world users as they seem similar internet users and they want to give their local team in China more time to build out and adapt over a multi-month or longer period
Jefferies....asked about clicks on video formats and if Google will offer this on search plans...........right now strictly on AdSense networks and they want to do it on user choosing to initiate the ad rather than the many annoying video ads out there right now....still on a CPM model just like on image campaigns.....
Merrill Lynch......asked about financial goals in general as far as objectives of the company........Google said they monitor financials daily but want to run it for long-term by making best decisions they can.....
Susquehanna.....asked on testing with DELL was it new users or just higher use from existing; also asked if google will the build their own in other areas or would they do M&A for traffic acquisition strategies.......on Dell they saw both new users and increase use from existing; on M&A they said they wouldnt rule out M&A to just buy customers, but they said it traditionally hasnt worked for companies to go out and just buy customer traffic and they prefer to do the partnership model.......they also asked how the street should interpret the financial models....Google said they want to think of it as a model that increases traffic and increases top-line.......as far as when they go cashflow positive, Google said they look for up-front pay or thru revenue sharing and that they should be considered multi-year deals that may not be positive cashflow fiirst year but definitely over the life of the deal.......
Goldman Sachs....asked on Korean market and increasing share there.....Google said Korean market is somewhat unique and they will expand their own engineering and local partnerships....said Korean and Chinese markets are somewhat similar in the local competition.
more on DELL, Google didnt want to comment on rumors of the pricing and noted the confidentiality agreement......said they would like to do more deals like this bundling deal....
Oppenheimer.......on efforts of improving quality of advertising.......Google wants to do better and more highly targeted ads when it is appropriate rather than just a basic ad rather than competitors doing general distracting ads.....they think behavioural model may be better than just local search ad model.....
William Blair & Co....asked about investing in competing ads out there versus what competitors are doing......they arent seeing much change in structure of partnerships but seeing some traffic go up in the partnership deals.....stability of ad network seems to be strong......saying entrance of new competitors in new areas that are not yet tapped increases overall ad and overall traffic, so it will ultimately benefit them too.....
Prudential (last one)..........asked about if the company will be at disavantage because of new Internet Explorer with search and if Dell's deal will alleviate the pressure......said that MSFT default in IE7 is set to Microsoft search but that that use of the power in Windows is done in the appropriate legal and competitive way......
At 2:00 PM EST Google (GOOG-NASDAQ) initiated its investor and analyst call.
It was all Q&A, but they said up front that they would not answer quarterly performance and that they will not offer financial guidance. I put in the firm name when applicable but some where hard to hear because of static.
on the AOL partnership......AOL deal signed a little over a month ago and took place today...they provide search services to AOL. so far everyone is pleased with the deal. Will add a mechanism where the Instant Messengers could add Google Talk. Said Nokia and RIMM ramping to include Google Talk too.
on CAPEX....they get advantage by building their own infrastructures (supercomputers in data centers). numbers are large but they look for additional performance out of what they build as opposed to renting their capital equipment (said renting is not an option)
on product development.....asked if they would single out the winner and loser.....biggest success was the keyhole of ads to mapping and satellite integration as well as building out the local ad information other than just yellow page equivalent......they said their off-line print has been nascent and they think the format and content working has been a laggard compared to their hopes.
on clickthru rates......ranking algorithims use keyword purchasing and targeting.....display ads being tested to see if people are really responding or not so they can make the current model even better......did say their high quality shopping is not really a takeoff of an Amazon or eBay system on payments as it is more advertiser-targeted
UBS asked about the Dell deal.......goog says they are ecstatic but there are not any barter deals for hardware.....they wont go into financial or contract details of the DELL deal b/c of confidentiality.....also asked if they will be hiring more than last year and they said they are looking to hire the best and brightest in each field and lower job postings shouldnt be read into.....
CSFB asked more on CAPEX about real estate......at the rate of headcount growth they have to keep pace and try to get more real estate that is in the same geographic area.....bought some properties to redevelop in Mountain View and Bay areas........when asked on municipal wi-fi in Mountain View and other impacts it can have on the business......they know that users that switch up to broadband are much wider users of Google....said it isnt a requirement taht Google does all of this nationwide and globally but it is important that Everyone do it......large urban development wifi initiatives are going to require more partners than just Google because of the vast demands in each local effort.....said partners are bearing much of the physical equipment costs so it is good for Google
on Google potentially building a Browser........said they have active partnership with Firefox, said Safari is good in Mac space and that the consumer has enough browser choices because of these and opera and others......the implication is that there is not a need for GOOG to build their own browser
on Best Buy and other searches...........Best Buy efforts just getting started as they expand local and w/ click to call....on Base and Yellow Pages they are working with may providers and lauched local AD WORD STARTER EDITION to get their campaigns started.....local is becoming significant component of their business.....
ThinkEquity.....asked about valuing content strategy......right now they don't offer broad ramming products that they see demand for and they want to but havent figured out how to build it yet, working on it for the next year w/ hopes of finding more.....they added demographic site collections similar to what movie studios have done prior to DVD and movie launches.
Piper Jaffray......asked about Google Base on traction and listings, but harder to see if it is living up to user adaption: Google said they use Google Base to blend search results into Google search experience.....they dont see it as a large separate site but more as another point within Google like Froogle was 2 years ago.....wants to offer more integration and that it will lead to higher traffic overall......they are going with more "refinement boxes" on things like recipe searches and will integrate these in other searches around Base and maybe others......also PJ asked about difficulty in gaining ground on search in China.....Google said they havent seen the need to segregate the Chinese user from the rest of the world users as they seem similar internet users and they want to give their local team in China more time to build out and adapt over a multi-month or longer period
Jefferies....asked about clicks on video formats and if Google will offer this on search plans...........right now strictly on AdSense networks and they want to do it on user choosing to initiate the ad rather than the many annoying video ads out there right now....still on a CPM model just like on image campaigns.....
Merrill Lynch......asked about financial goals in general as far as objectives of the company........Google said they monitor financials daily but want to run it for long-term by making best decisions they can.....
Susquehanna.....asked on testing with DELL was it new users or just higher use from existing; also asked if google will the build their own in other areas or would they do M&A for traffic acquisition strategies.......on Dell they saw both new users and increase use from existing; on M&A they said they wouldnt rule out M&A to just buy customers, but they said it traditionally hasnt worked for companies to go out and just buy customer traffic and they prefer to do the partnership model.......they also asked how the street should interpret the financial models....Google said they want to think of it as a model that increases traffic and increases top-line.......as far as when they go cashflow positive, Google said they look for up-front pay or thru revenue sharing and that they should be considered multi-year deals that may not be positive cashflow fiirst year but definitely over the life of the deal.......
Goldman Sachs....asked on Korean market and increasing share there.....Google said Korean market is somewhat unique and they will expand their own engineering and local partnerships....said Korean and Chinese markets are somewhat similar in the local competition.
more on DELL, Google didnt want to comment on rumors of the pricing and noted the confidentiality agreement......said they would like to do more deals like this bundling deal....
Oppenheimer.......on efforts of improving quality of advertising.......Google wants to do better and more highly targeted ads when it is appropriate rather than just a basic ad rather than competitors doing general distracting ads.....they think behavioural model may be better than just local search ad model.....
William Blair & Co....asked about investing in competing ads out there versus what competitors are doing......they arent seeing much change in structure of partnerships but seeing some traffic go up in the partnership deals.....stability of ad network seems to be strong......saying entrance of new competitors in new areas that are not yet tapped increases overall ad and overall traffic, so it will ultimately benefit them too.....
Prudential (last one)..........asked about if the company will be at disavantage because of new Internet Explorer with search and if Dell's deal will alleviate the pressure......said that MSFT default in IE7 is set to Microsoft search but that that use of the power in Windows is done in the appropriate legal and competitive way......
posted by Jon C. Ogg at 3:28 PM
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