Thursday, February 17, 2011

Google Q4 2010 Earnings Conference Call (Review, Audio) *Relentless stream of new features & product innovations*


Google reported Q4 2010 financial results on Thursday, January 20, 2011

Google Q4 2010 Earnings Conference Call

Google reported excellent December Q4 2010 earnings on January 20, 2011. Financial charts, review, and commentary are posted on the Google Financial Performance page. The Google December Q4 2010 earnings conference call audio has been posted below, with notes preceding.

Quick Summary The excellent Q4 financial results derive from Google operating in the worldwide digital economy which is growing rapidly as the web expands and more people come online. Both Google's core and emerging businesses are exploiting and monetizing this digital economic growth. Mobile, Android, new ad formats, and the display network are improving revenues. Search is still the Google core business and will continue to be, although both display and applications are considered equally significant for resource and development allocation and ultimately for revenues.

"Very Strong Quarter and Very Strong Year" Present at the Q4 2010 earnings conference call were Eric Schmidt, Chief Executive Officer and Chairman of the Board, Larry Page, Co-Founder and President of Products, Sergey Brin, Co-Founder and President of Technology, Patrick Pichette, Senior Vice President and Chief Financial Officer, Jonathan Rosenberg, Senior Vice President of Product Management, and Nikesh Arora, Senior Vice President and Chief Business Officer. Eric Schmidt opened the conference call with some general remarks, "We've had a very strong quarter and a very strong year. Our outlook is very, very bright." In the earnings press release, Schmidt stated, ""Q4 marked a terrific end to a stellar year. Our strong performance has been driven by a rapidly growing digital economy, continuous product innovation that benefits both users and advertisers, and by the extraordinary momentum of our newer businesses, such as display and mobile. These results give us the optimism and confidence to invest heavily in future growth - investments that will benefit our users, Google and the wider web."

Management Restructure

"We have a common vision" Eric Schmidt said that he, along with Co-Founders Larry Page and Sergey Brin, had asked, "How can we run the company (Google) even better? We decided to make some changes in the structure, in the way we actually operate. Larry is ready (to be CEO). We have a common vision (Schmidt, Page, Brin)." The official press release stated the restructure of management was "to streamline decision making and create clearer lines of responsibility and accountability at the top of the company".
* Larry Page, Google Co-Founder, will take charge of Google's day-to-day operations as Chief Executive Officer.
* Sergey Brin, Google Co-Founder, will devote his energy to strategic projects, in particular working on new products.
* Eric Schmidt will assume the role of Executive Chairman, focusing externally on deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership--all of which are increasingly important given Google's global reach. Internally, he will continue to act as an advisor to Larry and Sergey.
Further review is in a previous post, Google Restructures Management (Video, Review) *Co-Founder Larry Page will be CEO again*.

Co-Founder Larry Page Discusses Google Co-Founder and President of Products Larry Page made some comments regarding the management restructure, the contributions of Eric Schmidt, and about Google in general. "Google is incredible opportunity. When we started Google, people thought we were coming in too late. There were already a lot of other search engines. Computing life is still in the very early stages. We are really only at the beginning."

Co-Founder Sergey Brin Discusses Google Co-Founder Sergey Brin noted his working with Eric Schmidt and Larry Page. "Now that we've clarified our roles, I would like to work more on my personal passions, including several important products I hope to tell you about in the future."

Q4 Earnings and Operations Review

"Phenomenal ending to a terrific year" Patrick Pichette then reviewed the Q4 financial results. Q4 and 2010 was a "phenomenal ending to a terrific year at Google. The incredibly strong performance in Q4 and 2010 in general is really a testimonial to the fundamental trends in the digital economy. Those trends are fueling huge opportunities for innovation and for growth. One of these profound trends is the shift of advertising from offline to online. And it continues at quite a rapid clip. And you've seen it fueling growth both in our core search business but across the board as well. A case in point is revenue growth has accelerated in the second half of 2010. Investments in our newer businesses, display, mobile, enterprise, they are also in parallel creating a second powerful growth engine for Google." CFO Pichette then reviewed the financial results, which are also reviewed on the Google Financial Performance page. Pichette also noted "a digital economy that is on high gear. It is with confidence we are pursuing an aggressive growth agenda. Growth agenda means investing and here's a couple of places. We've announced a compensation change in Q4 which will affect all of our employees. We raised all base salaries by 10% across the board. We shifted some compensation from bonus to base salary for non-executives. We continue to make strategic investments in sales and marketing for not only new products, but also for advertiser acquisition. We are also investing in our long-term infrastructure, including facilities and core computing network. We continue to invest aggressively in a bold innovation agenda."

Product Management and Product Changes at Google

Jonathan Rosenberg, Senior Vice President of Product Management, then discussed product management and changes at Google. In 2010, management "doubled-down" on the core business, which is search and search ads. The financial performance reflects this effort and successful bet. Behind those numbers are a "relentless stream of new features and product innovations". In 2010 "there was a big effort to make search more interactive" You can see that with Google Instant and more recently with Previews in Instant as well. Earlier in 2010, we launched new interfaces for both web search and image search to make easier and to make it more intuitive to work with the results. We are also making search more intelligent. We are also now starting to roll out place search."

"We've also added several new ad formats, site links, accelerating ads, product listings. The biggest boost of all came from ads quality improvements. Q4 was our best quarter in years from an ad quality standpoint. We launched over 20 updates with results that were nearly double what we would normally see in a strong quarter. We're still finding lots and lots of ways to make ads better. Another change in 2010 was that several of our new businesses started to achieve escape velocity. Our philosophy is to encourage lots of innovation and then we feed the winners and starve the losers.  Like display, we now have over 2 million publisher partners. The number of transactions on the Doubleclick ad display tripled. YouTube revenue more than doubled. Enterprise added impressive customers like the US Government Services Administration (GSA). Android is activating over 300,000 phones per day. This helped drive a 10X (ten times) increase in searches from Android devices. Product and sales teams are working together more closely than ever."

"You can expect more of the same for 2011. We are going to double-down again on the core of search and search ads. We are going to feed the 2010 winners: display, YouTube, enterprise, and Android. But I'm also excited about a couple of our new businesses, local and commerce. In local, over 5 million businesses have claimed their Google Place pages. We recently started testing a new ad placement we call Boost. In commerce, we are investing a lot to close the loop between offline and online shopping. The key to unlocking local commerce is to make it easier for people to search and then consummate their transaction from their mobile device. I think this is the year smartphones will play the big role in commerce I've long predicted. We're asking everyone here (sales, products, engineering) to do more and do it faster."  Better targeting, better ads, more localization.

Question and Answer Session

Notes and Comments from the Question and Answer Session:
* We are collaborative and transparent with regulatory authorities. (Schmidt)
* Real-time search and social (identity, relationships) search are two important trends to keep search relevant. This is the tip of the iceberg. (Brin)
* We are at the very early stages of what search and social can do. (Page)
* No question that our extraordinary financial results are coming partly from algorithmic improvements that we do all the time. (Schmidt)
* Our basic strategy is to have the right ad in the right spot done exactly right every time. That is the great magic of Google. (Schmidt)
* Tablet search peaks on weekends and dips on weekdays, same as desktops. Search tends to be more for news and shopping. Tablets tend to behave a little more like desktops than smartphones do. (Rosenberg)
* We decided to put our focus on small to medium size advertisers later in 2010. That is where a lot of our growth engine is going to come from in the future. (Arora)
* One out of every five searches have some sort of local tendency or factor. (Pichette)
* The idea is that the web should be a virtual mirror of the world at all times. That mirror becomes much useful and is relevant to the users when you get everything organized around places in the physical world. GPS and smartphones has helped us understand where you are. (Rosenberg)
* In 2010, it has become easier for local businesses to identify themselves in context on Google and it has become easier for Google to find out where you are. (Rosenberg)
* All of our core properties (businesses) are growing very well. Overall we are very pleased with our growth rate of revenue. (Pichette)
* The stronger trend is the shift of brand dollars from the offline world to the online world. (Arora)
* Three factors are driving growth and click through rates: 1) strength of the economic recovery, 2) consumer shift online, 3) platforms are changing (increased use of mobile phones, tablets) plus improved ad quality. (Pichette)
* New ad formats are boosting click through rates: product ads, listing ads, coupon ads, seller ratings, site inks. The largest impact and most significant change has been "visible url", moving link below the "creative" line to a separate line where consumer can see where they will go if they click the link. (Rosenberg)
* Mobile search 4X (increased 4 times) in 2010 (Pichette)
* Click to call ads becoming more prevalent (Rosenberg)

Google December Q4 2010 Earnings Conference Call (Audio)

Nikesh Arora, Sergey Brin, Larry Page, Patrick Pichette, Jonathan Rosenberg and Eric Schmidt participate in Google's Q4 2010 Earnings Call January 20, 2011.

About Google

Google describes itself in press releases as, "Google's innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major global markets. Google's targeted advertising program provides businesses of all sizes with measurable results, while enhancing the overall web experience for users. Google is headquartered in Silicon Valley with offices throughout the Americas, Europe and Asia."

Google's Mission Statement: "Google's mission is to organize the world's information and make it universally accessible and useful. The first step toward fulfilling that mission came when our founders, Larry Page and Sergey Brin, working out of a Stanford University dorm room, developed a new approach to online search that quickly spread to information seekers around the globe. Google is now widely recognized as the world's largest search engine -- a free service whose utility and ease of use have made it one of the world's best-known brands almost entirely through word of mouth from satisfied users."

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