February 28, 2006 2:21 PM PST

Google's CFO addresses slowdown

Google CFO George Reyes told attendees at a Merrill Lynch investor conference Tuesday that online-ad growth rates were slowing, prompting a sell-off in the company's stock.

Here, verbatim, is what Reyes had to say about the situation.

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George Reyes, CFO of Google, discusses how he thinks sticking with ads as the main source of revenue will continue to bring success.
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After 18 months of seeing rapid growth from engineers perfecting Google's advertising system, "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," Reyes said. "Clearly our growth rates are slowing. And you see that each and every quarter. And we're going to have to find other ways to monetize the business.

Asked if online-ad monetization had peaked, he replied: "We're getting to a point where the law of large numbers starts to take root?. ($6 billion in 2005 revenue) is nothing to sort of shake a stick at. But 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. The question is at what rates?"

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"Growth will slow"--Hear Reyes discuss his outlook on Google's future.
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"Advertising revenue is still about 97 to 98 percent of our revenue. I get a lot of questions from investors, 'Well gee, that's risky. You ought to diversify,'" Reyes said. "Our collective view as a management team is that at some point in time we will diversify. But right now the opportunity is so immense, depending on what data you subscribe to. People believe we are still in the very early innings of search penetration and the evolution of search."

When asked about the company's bid to build a free Internet wireless network in San Francisco, Reyes said: "We made some similar related investments in broadband-over-power-line a year and a half or so ago....I would characterize all these things as interesting experiments."

See more CNET content tagged:
CFO, growth rate, online advertising, monetization, Google Inc.

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I hope Google continues to do well
As an average Joe consumer, I use their search engine, their gmail service, Picasa, and enjoy Google Earth and other things they have done. In gmail I NEVER get any spam in my inbox. In my old hotmail account this was an impossibility. Google Earth is an amazingly interesting and educational product. I can really see it having a place in an educational setting to show you children just how big the world really is and give them a different perspective about Earth. Picasa is a really handy program for organizing, editing, and sharing my pictures.

I'll admit that Yahoo search does return results that are more relevant to what I want, but I continue to use Google. Mainly because I guess I share their vision of what this world should look like. They way they run the company, the way they create tons of new products, the attention to detail and quality, the way they develop everything from a consumers perspective... I read somewhere that Google was going to try to make the internet free to San Francisco. That's just amazing! I love the way their company looks and how they treat their employees (<a class="jive-link-external" href="http://www.time.com/time/photoessays/2006/inside_google/" target="_newWindow">http://www.time.com/time/photoessays/2006/inside_google/</a>).
They have a vision that is unique to Google. I'm sure an employee at Yahoo doesn't have tons of little legos, gadgets, and lava lamps sitting on their desk. I want to keep this vision of Creative Quality alive. Creative Quality is the core of technolgy and innovation, it is the fuel for growth, and it sets Google apart from most other companies.
Posted by coryschulz (326 comments )
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