AdGooroo analyst Rich Stokes called the move a "quality purge" by Google to remove its weak accounts. The drop in advertisers was more than offset by a 12.5% increase in ad spending by top U.S. retailers, Stokes notes.
But a closer look might see the 5% drop in advertisers as a bad thing. Given the economic climate, it's quite possible that Google has a host of bankrupt or defunct ad clients that are starting to drop out of the roster.
Don't expect any clear answers from Google on this.
As the gatekeeper of Internet advertising, Google says it's a priority to generate fewer -- but better targeted -- ads. If successful, Google can deliver the highest-quality ad -- one that a searcher is more apt to click on -- and charge more for the quality. That would certainly fit the "quality purge" scenario.However, the concern is that sales growth usually takes care of all the problems. So if Google had to pull a whole lot of levers to cull deadbeats, then the fourth quarter numbers may reveal some weak spots. Analysts are expecting Google to post a profit of $6.50 on $4.92 billion in sales, excluding traffic acquisition costs (or TAC). "The bar is very high for Google, as they are very good at jumping over it," says one money manager who says he's watching the show from the sidelines with no positions. But clearing the bar by a mile might not be enough in this arena to avoid a post-earnings selloff. Reported by Scott Moritz in New York.
>>Google Takes the High Road >>Google's China Fight Unplugs Motorola >>Google Falls Below $600
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