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Google’s Clarification Clarifies…Nothing

Eight hours after the mayhem surrounding CFO George Reyes’s remarks, Google did the wise thing: It issued a press release.  This timing of the release all but proves that Reyes’s comments were inadvertent (otherwise the release would have gone out this morning).  So far, so good.

Unfortunately, far from clarifying Reyes’s remarks, the press release contradicted them.  Google is providing a real-time clinic in how not to communicate with Wall Street.

Per George Reyes this morning, responding to a question about whether anything had accelerated revenue last year:

So we went through a period of probably 18 months where we…had what was called a RevForce initiative–Revenue Force–which was really a team of really very bright technical engineers that were trying to tweak and optimize the ad system…and that sort of paid off nicely with the fruits of that labor.   And what’s happened since then is that we got so good and so efficient at that back then that really most of what’s left is just organic growth, which means you have to grow your traffic and you have to grow your monetization…  Clearly our growth rates are slowing.  And you see that each and every quarter.  And we’re going to have to find other ways, you know, to monetize the business.

[15 MINUTES OF QUESTIONS, THEN A FOLLOW-UP REQUEST FOR CLARIFICATION]

I guess the only clarification I would offer up is we’re getting to a point where the law of large numbers starts to take root…  At the end of the day, growth will slow.  Will it be precipitous?  I doubt it.  Are there more things we can do to sort of improve revenue performance?  Probably.  So I’m not turning bearish at all.  I think we’ve got a lot of growth ahead of us.  It’s a question of at what rate.

Per this evening’s press release:

We would like to clarify and provide further information on these statements. As we have stated before, monetization improvements will continue to be a key factor in driving future revenue growth. We still see significant opportunities to improve monetization and intend to continue to focus our efforts in this area.

Moreover, as we have stated in our SEC filings, our revenue growth rate has generally declined over time and we expect that it will continue to do so as a result of the difficulty of maintaining growth rates on a percentage basis as our revenues increase to higher levels.

This morning, everything seemed clear (and the stock dropped $30 on the news): CFO George Reyes had explained, in vivid detail, that a major 18-month revenue-enhancement initiative had now run its course and all that was left was organic growth.  A ham-handed way to deliver information, but simple enough.

This evening, however, after remaining silent all day while the stock got crushed, the company seems to be saying that Reyes actually didn’t say anything (other than the standard pablum about when companies get big, their growth slows).  Far from providing “further information,” in other words, the release just tried to stuff the cat back in the bag.

So which is it?  Has an 18-month RevForce initiative run its course–or was George Reyes hallucinating this morning?  Is Google just another big company at which growth will slow someday?  Is the company seriously trying to say that today’s entire stock plunge was just the market’s failure to realize that George Reyes didn’t really say anything?  Monetization improvements will continue to be a key factor in driving future revenue growth? We still see significant opportunities to improve monetization and intend to continue to focus our efforts in this area?  What kind of “clarification” is that?

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