Google (GOOG) has changed a great deal in the last two years. It is not just the bigger revenue and the growing share of market. It is not that the company has desktop software to compete with Microsoft (MSFT) or that the company owns video sharing giant YouTube.
The difference is that Google now has such a large piece of the US internet ad market that it has become a proxy for the overall economy in a way that the car industry was four decades ago.
By some estimates, Google now has 40% of the US online ad market. The company’s AdWord program draws marketers from an immensely broad spectrum of industries from financial services, to consumer goods to software to cars.
What this means is that Google’s earnings for this quarter will be as good a proxy for the overall economy as the numbers that any company reports this earnings season.
Under the circumstances, Google’s Q3 takes on a special significance. If they are good, tech stocks will be likely sucked higher by a surge in the company’s shares. If they are below expectations, they could take tech down with them. But, the effect is likely to be broader than that.
If Google has poor revenue growth, it is as good an indication that the economy is slowing as any other. It is arguably the most effective place to market almost any type of product or service. A slip in the numbers means that marketing spending in general is pulling back.
Douglas A. McIntyre