Google Grabbing Global Market Share

For the fourth quarter, Google is expected to earn $1.76 a a share on revenue of $1.29 billion. That compares with EPS of $1.51 on revenue of $1.57 billion in the third quarter of 2005, and EPS of 69 cents on revenue of $1.03 billion in the fourth quarter of 2004.

However, many questions were raised after Yahoo! delivered a less-than-stellar quarter earlier this month. After listening to the Yahoo! conference call and noting Yahoo! missed its EPS and revenue targets, I had to wonder:

Did Yahoo! simply get beaten by Google?

Despite Yahoo! management's belief that it gained market share, did Google grab more market share?

Are advertisers voting with their wallets and have they selected Google over Yahoo!?

So is Google pulling away from Yahoo!? I have no doubt that Google will likely exceed its numbers. By all anecdotal indications, Google is grabbing market share in a fast-growing global market. This is great two-dimensional growth. In addition, we can add a third dimension -- deals with all of the smaller businesses and technologies that Google is investing in away from paid-search advertising.

Google shares took a hit on the January options-expiration day selloff. This was in part due to the expiration effect and partly due to concerns over Google's potential legal imbroglio with the Bush administration over user-privacy information. This simply created a vacuum in Google's share price, which was filled the following week.

It was always my intention to take profits on part of our Google client positions heading into earnings. We did not want to sell into the expiration panic, so we waited until the week after expiration when Google shares rebounded, and sold off about 40% of our positions, much of which we own below $200.

Google is going to be a battleground this week, for traders, investors, analysts and the media, so I am happy we found a good level to take some Google risk off the table.