Google reported revenues of $5.54 billion for the quarter ended September 30, 2008, an increase of 31 percent compared to the third quarter of 2007 and an increase of 3% compared to the second quarter of 2008. This, at a time, when the once powerful Yahoo reported revenues of $1.79 billion, and saw earnings fall by 64 percent to $54 million, and announced plans to lay off 1,500 employees.
Key to Google?s success, and perhaps a reason for the downturn having less of an impact on the company, is its focus on relevance?both in terms of search and advertising. Google has focused extensively on making its search relevant?last year, they introduced a feature called QDF (quality deserves freshness) that gave recent content more importance, based on the notion that users prefer to search for recent developments, rather than outdated content. Their search has built in personalisation features for better results, and in the last quarter alone, the company launched over 100 search improvements. A part of this would have contributed to an improvement in the quality of results served up, some of which may also have been a defensive move. As Google indexes more and more pages, it becomes all the more difficult to deliver accurate results to users who are searching for information.
Google is also preparing for the future?with significant localisation features across the globe, in order to attract that part of the world for whom English isn?t the preferred language. Over the past year in India, they?ve introduced tools and services for local languages: Google now has search available in eight Indian languages?Hindi, Tamil, Telugu, Malayalam, Gujarati, Marathi, Kannada, and Bengali, and have also launched Google News in Tamil, Malayalam and Hindi.
Localisation and the accuracy of search results is critical to Google remaining the preferred search engine for the world, since it serves up advertisements based on the context of the search, as well as personalisation trends that help identify user intent.
Google believes that in case of a downturn, people are more likely to search more for more relevant information and compare inputs. The intent behind the search also makes them a preferred choice for delivering advertisements?as marketing budgets are reduced, the services that offer more relevant results and better return on investment to marketers would be preferred. This is where Google?s pay-per-click model comes in, where marketers buy advertising space related to relevant search terms. For example, a search for the term ?Hotels in Hyderabad? delivers ads in the right colum of Google Search, from Intercontinental Hotels, TravelGuru, Marriot, six others, and the marketers will essentially pay for delivering an interested search user to the advertisers website or landing page.
This relevance is what has led Google to attract small advertisers because they pay only for peformance, and can work with a budget that is, say, as low as $10 (around Rs 450). The automated nature of the service also means Google doesn?t need a large worldwide sales force, and saves on salaries. As budgets crash, advertisers are going to look for more bang for their buck?and it?s likely that businesses will focus more on sales and lead generation than branding. It thus appears that Google is not likely to be affected as much as some of the others, who aren?t nearly as focused on relevancy.
At the same time, it wouldn?t be right to say that Yahoo isn?t striving for relevancy ?earlier this year in May, the Sunnywale, California based company filed for a patent in India for Behavrioural Advertising, which tracks user behaviour. Data on which content segments users visit, both in the short and the long term gives the portal data which can be used to deliver more personalised and relevant advertisements to each particular user. The greater the relevancy, the greater the chances of a click, and increased revenues.
The author is the editor of digital media analysis site MediaNama.com He can be reached at nikhil@medianama.com