Technology Stocks – How Google Changes Impact The Market
Leave it to Google to turn the online world on its head…
Just when web experts had the “system” figured out, Google goes and changes the game. And for everyone, including Google, the stakes are high.
You see, last month Google changed their search algorithm hoping to reduce the number of “content farm” websites making page 1 of your search results. They’ve told us, customers (you and me) want higher quality results. So they changed things…
Now, this news may have been “under the radar” for you, but it’s very important.
And here’s why it matters…
Researchers have statistics proving websites appearing in the top spot on a Google search result page earn 35% of the traffic! That leaves only 17% for second place and 11% for third. Results get into the single digits beyond spot 3 and as we reach page 2, it’s even less than 1%.
A ranking change can make or break an online business…
Now, this isn’t the first time Google has tweaked its algorithms a bit. Most of the time, changes are so subtle many people wouldn’t notice. But this is a major change. Its potential impact is on millions of rankings.
More importantly, it changes where the advertising dollars flow…
Online advertising is a massive business. And a lot of dollars are spent with news and content aggregators. So if traffic dries up, ad dollars fall. It might even put some out of business!
Let’s go down the rabbit hole a bit further…
There’s a method of search engine optimization (SEO) known as linkbacks. It’s one way to get your site a higher ranking. The concept is simple… The more websites linked to your page, the higher your ranking on Google.
The thinking is, if you have lots of different websites linking to your content, you must be a quality content provider. And your site adds value to the World Wide Web.
But this isn’t always the case…
For example, JCPenney was exposed by the New York Times in February for padding their linkbacks. Apparently JCPenney hired a SEO company to improve rankings on Google. The company they hired manufactured fake websites and even bought and sold links. It was all an attempt to trick Google into raising JCPenney’s page rank.
Google said they have penalized JCPenney for their mischief. But who really knows? JCPenney was just one of many companies caught doing this.
Don’t be naive enough to think they are alone…
Right now we have Google looking for cheaters and thousands of companies trying to improve their rankings.
Now consider this…
Does it really make sense for Google to clear the search results of all spam? Google sells ads through their AdSense program. And with the current model, they make money when people click through their ads. Coincidentally, you’ll find a lot of their ads on these aggregator sites.
That’s potentially big bucks here for Google…
Google’s partner sites generated revenues, through AdSense programs, of $2.5 billion in the fourth quarter of 2010. This represents a 22% increase from fourth quarter 2009. $2.5 billion is almost 30% of Google’s revenue!
Do you really think they want to cook the golden goose?
Now here’s my biggest concern…
Google’s algorithm changes will impact revenue and earnings at many online companies. It’s a big red flag. I’m going to watch online retailers closely. It’s a wait and see approach to determine what impact these Google changes have on company performance.
Some companies to watch closely include Netflix (NFLX), eBay (EBAY), and Amazon (AMZN). You never know how some of these changes might produce a huge ripple effect in the market.
Category: Stocks
