Google drops a Google

Well, not really, but I always wondered what it would be like to actually see that as a headline. In any case, Google announced earnings today after the closing bell and they didn't meet eps targets that were set by many analysts.

Most analysts questioned (believe me, that's all it is) that Google would earn $1.76; however, they came in at an (post-charity donation) adjusted $1.54. Profits overall were up an astounding 80%!! Nonetheless, most shareholders sold in after-market trading like they thought the end of Web Advertising was imminent.

Shares were down as much as $68.17 (15.8%) in after-hours trading, the close price on the day was $432.66. A quote that I found interesting from the AP post:

The amount of shareholder wealth shed by Google during extended trading exceeds the current market value of General Motors Corp.

Wow!! Amazing to try and wrap your head around that statement. A couple of factors leading to Googles shortfall is the fact that costs for Sales and Marketing almost doubled from $76 Million in 2004 to $155 Million in 2005. The company also added nearly 700 people in Q4.

Is this the end of Google? Doubt it. Considering how many people do searches earch day (and the constant rate of growth of that number) also combined with the fact that more and more companies are increasing their spend on Search Advertising, Google's going to make a lot of money for many years to come.

Some things that I think are challenges for the company are:
-Increasing S&M costs.
-Expanding Internationally (see recent moves into China)
-Strategic Acquisitions (Rumors that Google was going to buy Napster are allegedly untrue)
-Click Fraud (By far, I think this represents the biggest threat to Google's business)

Should be interesting to see what happens.