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Online Advertising Will Overtake Print in 2012

Posted on Monday, Jan 23rd 2012

According to eMarketer’s latest report, this year, U.S. online advertising will exceed print-based advertising spending for the first time. Online advertising spending is projected to grow 20% this year to $40 billion, while print advertising is expected to decline 6% over the year to $33.8 billion. Last year, online advertising revenues also grew more than 20%. Online advertising spending is expected to grow to $62 billion by 2016, while print advertising will continue to decline during the same period to $32.3 billion. Below is an infographic charting the growth of online advertising, courtesy of CNBC.

Google’s Financials
Google’s (NASDAQ:GOOG) Q4 revenues grew 25% over the year to $10.58 billion, falling short of the market’s expectations of $10.91 billion. EPS grew from $8.75 last year to $9.50 but fell short of the market’s projected $10.49. This was the first time in the past four quarters that Google missed market expectations. Earnings were hurt by the 35% increase in operating expenses to $3.38 billion during the quarter. The growth in expenses was driven by the increase in hiring and advertising spending.

Revenues from Google-owned sites grew 29% over the year to $7.29 billion, and revenues from partner sites grew 15% over the year to $2.88 billion. The United States brought in 53% of total revenues compared with 52% a year ago. Google were, however, disappointed by the European markets, especially the German markets where the euro crisis hurt revenue growth. However, there was tremendous growth in display advertising and mobile adoption. Display advertising sales closed at nearly $5 billion revenues for the year and Android adoption grew to over 250 million mobile phones globally.

Google ended the year with revenues growing 29% over the year to $37 billion with EPS growing 21% over the year to $36.04.

Google’s Social Media Offering
Google seems to be very pleased with the performance of their social media offering, Google+. The company claims that within seven months of its launch, the service has added more than 90 million users worldwide. During the past quarter alone, they added 50 million users to Google+. Their data shows that 80% of Google+ users access their “products”  at least once a week and 60% access them daily. The unambiguous use of “products” leads analysts to believe that Google may be referring to any one of their offerings, including Gmail, Documents, Calendars or Maps, to name a few. Google, though, is hopeful that Google+ will be as successful Gmail, which has about 350 million active accounts.  For now, though Google+ may have a good adoption rate, they are still significantly behind social networking giant Facebook’s user base of more than 800 million users worldwide.

Google’s Acquisitions
Google continued their acquisition spree by purchasing smaller startups to improve their offerings. As part of their focus on local search, they recently acquired Clever Sense, a California-based company for creating the mobile app Alfred. Alfred offers personalized recommendations for local businesses such as cafes, clubs, and restaurants. The app keeps improving its performance through an algorithm that takes into account the user’s past decisions.

To continue to improve Google+, they added Katango to their portfolio. Katango’s iPhone app launched last summer was focused on Facebook to simplify the selective sharing of information across multiple groups of friends. Although Google does have Circles within Google+ to help sort a user’s friend list, the process remains a very manual one. Katango, on the other hand, has built-in logic that evaluates interaction among friends to sort them within various categories.

As part of their efforts to improve Chrome, they bought Apture, a browsing startup that developed Apture Highlights. Apture Highlights lets users highlight any phrase on a web page to bring up search results in a window. The search results include results from Twitter, YouTube, and Wikipedia. Analysts believe that such a search helps keep the user engaged with the page he or she was reading.

Despite these measures, Google’s stock took a beating because of their results. The stock is trading at $585.99 with a market capitalization of $189.8 billion. It touched a 52-week high of $642.96 in January 2011.

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I think the trends in favor of Online Marketing have been on rise very steadily, while those relying on print media have been going down steadily. Not a surprise given the reach, expenses incurred and the time it takes for an online medium to get the message across. I read somewhere in a report that estimated the print ads would be completely a thing of the past by about 2025 or so.

Mobile Reviews Monday, January 23, 2012 at 11:28 PM PT