Day 2: Search Stocks & Is Search Recession Proof?

Let’s do the stock thing again. As
with yesterday, the chart above shows
Google (GOOG),
Yahoo (YHOO), and Microsoft (MSFT)
against the NASDAQ, over the past month. The key difference is that while the
latter three stabilized, Google kept dropping. That leads some to wonder if
search is going to be in trouble. A closer look on that, below.

This time, I used Yahoo to chart the figures — and with Yahoo, I can

link to the chart so that anyone can play more.

So, Google kept going. How bad was the damage? Let’s look over the past year:

Ouch. But not so bad from another perspective:

I bought back the other two players for that. You can see Google’s lost
nearly all of its gains. But it is still in positive territory compared to Yahoo
and better than Microsoft…for the moment, at least.

I’m working on a longer post about the search crash that some are getting
behind or suggesting will come. Here are some recent related articles on this
topic, not all necessarily negative:

• 
  Recession-Ho! (The Search Ecosystem Enters its First Economic Downturn),
  MediaPost
• A Gloomy
  Searchonomic Forecast , Search Engine Watch
• 
  Recession Proof Search Engine Optimization Tips, Online Marketing Blog

One that caught my eye today was from Silicon Valley Insider,

Oh, My Aching Google…Down 10%!:

Google’s down almost $60 on the day, or more than 10%. So here’s our
question:

How are all you folks who assured everyone that Google and search are
recession proof feeling? Are you backing up the truck? Or are you beginning to
think we might have a point?

This got me kind of riled, because of my pet peeve — the assumption that
Google can be a bellweather for search. The problem is, Google sells ads well
beyond search. As I
commented to the post above:

"How are all you folks who assured everyone that Google and search are
recession proof feeling? Are you backing up the truck? Or are you beginning to
think we might have a point?"

I’m beginning to think that you miss the
point.

Henry, please do a post telling me what percentage of Google’s income is
generated from search — ads that are tied to an actual search behavior. Be
sure that you subtract any revenue for display ads, contextual ads, audio ads,
video ads — you get the point, right?

You can’t do that. Google doesn’t give you those figures. Instead, you’ll
have to rely on what advertising spend figures you can find. And those
advertisers often consider "search" to be contextual, when it is not.

So when you prematurely declare search is going to be hit based on Google’s
stock price, at least define search.

Is search recession proof? I don’t know. But considering it thrived and
survived during the last dotcom crash — a time when we also had a general
depression of the economy — yeah, I think it’s going to get through OK.

Is Google recession proof? That’s a different question. And it first is
better asked, is Google bubble proof? Because its current value may have
nothing to do with search and everything to do with what investors — many of
whom are idiots with no knowledge of fundamentals — believe Google will grow
up into (something well beyond search).

I don’t think Google is bubble proof — and if there’s a recession that hits
the stock market, I have no doubt people will pull back on their Google
gamble. But until we see a pullback on actual search spend — which won’t
happen overnight — you might break the two apart. And if you do see a
pullback on online ad spend, with a chunk called "search," I hope you’ll do a
real dissection of those figures to try and see if you can really find search
within them.

My prediction has long been this. If Google’s non-search activities get
into trouble and search stays strong, suddenly you’ll see them break out
search figures to show a strong underlying fundamental. That’s exactly what
Yahoo did when display started tanking. We’ll see.

Like I said, it’s a pet peeve, one I raised with Eric Schmidt
when interviewing him
on stage about two years ago:

Danny: Somewhat related: my understanding is that I still can’t go
to Google’s financials and know how much money is going into content ads
versus search – and I care about the search. I mean, to me search is a
different intention and contextual. And so when people say, "we’re going to
measure the health of the search market," I want to know how the health of the
search market is from a leader like Google. But I’ve always felt like when
those figures are mixed together, it pollutes the data. For all I know, your
contextual network is suddenly tanking, a whole bubble is about to burst out
there, but search will be healthy. But the whole search industry might go down
with it.

Eric: None of that is going to happen.

Danny: None of that is happening. And I was going to say,
alternatively, everything has been doing great.

Eric: Since we’re on the record, since we’re on the record and it’s
a public company, I want to make sure that what you just said [that the
contextual network is "suddenly tanking"] is not true.

Danny: Right. But that’s the opposite to what could be happening.
But contextual might be doing wonderfully, and search might be [tanking] …

Eric: They’re both doing well. Again, we have a whole bunch of
people who are trying to reverse-engineer the economics of Google. And we have
historically not wanted to give out the detailed information that you’re
describing. These are clickthrough rates, CPCs, RPMs, and so forth. There are
a number of reasons [not to split these out]. One of course is competitive.
But there’s a more fundamental reason, which is that anybody who looks at how
Google actually runs the ad network makes simplifying assumptions that are not
in fact true. And it’s important that we, Google, not give out information
that can be misused or is essentially false. So we’ve chosen, to the
frustration of many, to not reveal the underlying economics of the ad box.
Partly because it’s changing so quickly. And all of the estimates that you see
are based on smart people making estimates without our assistance. We think
for numerous reasons that’s the right decision. It’s how we run the business.

So what’s the health of search and how will it stand up? That MediaPost
article I listed higher up suggests search is about to hit its first recessions,
but I’ve written in the past and again in my Silicon Valley Insider comment,
this is the second time around. Search thrived in during the dotcom crash, and I
suspect it will come through OK.

That leads me to a nice post from SquareOak:

Recession & the Economic State of the Search Marketing Industry: An Interview
With An Economist. From a talk with economist Lauren Capp, some thoughtful
words:

I would expect that search marketing would fit general advertising trends, at
least to some extent. It’s expected that advertising will trail the economy in a
recession: advertising budgets are usually committed in advance, companies don’t
want to cut back on advertising and decrease their sales unless it’s clear that
consumer spending is going to be less responsive to advertising, and they’re not
likely to make big moves on their advertising budgets until they feel the
effects of decreased revenues. Search marketing isn’t exactly like other
advertising, however. Search marketing seems a little more essential than a huge
Superbowl ad, for one. Also, search marketing — just because of the nature of
the internet — can be more international than other advertising, so it might be
less affected by a US recession. But it is certainly not immune — and when
consumers stop buying as many goods online and companies don’t have the money to
spend on campaigns anymore, search marketers are sure to feel that.

There’s more to read at the post. Check it out.