Google and More Google

More than a few people have been asking us about Google's acquisition of YouTube.com lately. $1.65 billion is a lot to pay for an 18 month old company with little revenue. Our answer? Google needs content to sell ads, and Google has a lot of money. A hyper growth website like YouTube.com reached 30 million+ visitors per month and has content is just what a online ad seller needs. You can debate the price but not the reasoning. However, it's also not uncommon to price a website by multiplying the yearly visitors by $5 to arrive at a purchase price. Using that, Google actually got a deal because the price should be $1.8 billion.

In any case, Google can afford it. Today they announced another record quarter. they almost doubled their gross from the year before quarter. No small feat when all the words after the numbers start with a B, like from $1.58 billion to $2.69 billion in revenue.

So like I've said to others, they can afford it. If they had to write the whole thing off, it would be less than what they net in a couple of quarters...now. By next year, it might be what they net in one quarter.

So why does Google keep growing this fast? Online search ads work really well.

Search Sophistication Drives Sales and Marketing for Many

According to a prediction by Performics, online sales are expected to increase by 53% this 2006 holiday season. Much of that increase is a result of increased knowledge and use of search marketing by marketing managers apparently. They reported that more and more marketing managers are harnessing the full value of search and realizing that well managed online campaigns drive online and offline sales, AND increase brand awareness at the right time for consumers.

To back this up, they also reported that search spending is up by nearly 50 percent. Costs (per keyword) increased less than .5% while clicks increased 32%, showing that search marketing campaigns are improving and getting more efficient. This is providing more data that search engine marketing is growing very fast because it works AND is very cost effective.

MarketingSherpa ran a survey in August to elicit what marketing their readers thought got the best ROI. MarketingSherpa is a marketing research firm whose mission is to "publish real life case studies, practical know-how and benchmark data on what works in marketing today". Their results from 3,000 respondents were:

- Traditional online (display) ads - 24%
- Pay per click search ads - 57.5%
- Search engine optimization - 69.2%

Keep in mind, the respondents were saying these all had great ROI relative to other marketing. We believe (and use) all three for our clients but the hands down winner was good ole SEO. SEO sounds weird and may appear like voodoo but you can't beat it for ROI it seems.