Small and medium-sized businesses can learn something from the first quarter saga of Google, Inc. Despite a previous episode of preemptive panic and low expectations, Google smugly reported a profit increase of 42% compared to last year’s first quarter. Why did investors predict the worst? And how did Google bounce back?
To answer the first question, investors had become jumpy due to a report issued by Bear Stearns (PDF) on February 26. The investment firm’s report was an alert based on statistics from a web analytics firm, comScore, which claimed that the number of domestic paid clicks were down by 0.3 percent. That day on Wall Street, Google’s stocks started out down $25 a share and continued dropping before bouncing back a little.
Silicon Valley Insider called the news from comScore “shockingly bad,” but the web analytics firm issued another statement warning about limitations on the stats. For the reasons listed in their blog, their statistics may not necessarily give the best estimate of search engine marketing results.
But why the Wall Street freak out? The most obvious answer is the overall unreliable climate of the current economy. Investors are generally less confident and are more sensitive than usual to any negative news. They quickly changed their tune, however, shortly after Google, Inc., reported their profit growth. That day, stocks went up $76 a share.
And what accounted for Google’s success? There are several factors that may help explain Google’s success despite the present recession:
1. Increasing international web usage. Although the United States may be undergoing a contracting economy, this is not the case with other countries. When comScore reported the dip in paid clicks, all the stats were based on domestic activity. When Google announced its first quarter findings, it was revealed that their international business had risen significantly.
2. Better bargains for shoppers are online. Normal recession shopping habits tend to skew cheap. As discussed before, Wal-Mart has been doing well, not so much in despite of the recession, but because of it. Its reputation as an affordable chain of stores helped boost its sales. And shoppers are well aware that they have a wider range of opportunity for bargains, promotional deals, and competitive prices on the Internet.
3. More individuals become comfortable with technology. Web usage stats show that age groups outside of the typical demographic of 18-40 years are becoming more and more active online. As more individuals use the Internet for a variety of needs and desires, so will e-commerce. One research organization, Shop.org, issued a report that retail e-commerce will grow by 17% to a comfortable $204 billion. Unsurprisingly, many businesses reported paid clicks as a major source of business.
For the reasons listed above, it is entirely reasonable to expect a growth in business online. Google may be a juggernaut online, but businesses of all sizes can learn to profit from the current trends in web usage and e-commerce.
