About a month ago, Google reported what the shorts called a bad quarter, Jim Cramer said on TheStreet.com TV's Wall Street Confidential Web video Wednesday. Yet, when he looks at the stock, Cramer sees that it's very close percentagewise to where it had been.
"Obviously, it wasn't a bad quarter at all," Cramer said. He asked TheStreet.com's Internet reporter Vishesh Kumar to give market players a sense of what's going right at Google and why the stock is holding up better than much of the market.
"What is going right is their search business, which is just a juggernaut and which is actually kind of recession-proof also because it's seen by advertisers as more of a cost-of-sales expense rather than a marketing expense," Kumar replied. "So even if things turn down, you continue buying those ads because you see that on your bottom line right away."
Kumar also said he has continued to see advertisers gravitating from print to Google. "There's a big trend online," he said. "Accountability is something that's just going to change this $600 billion market completely."
Right now, Google, said Kumar, has about $12 billion in revenue expected this year from advertising, so at this point it still constitutes quite a small percentage of this $600 billion market. However, chief marketing officers "go with what works," he said. Right now they are buying TV ads, but that's eventually going to stop working as DVR penetration rates rise.
When asked about Google's rates, Kumar mentioned that the Internet goliath did something last week that is just getting noticed on Wall Street today, and consequently people are seeing their revenue numbers being moved up about 4% by JPMorgan and 2% by Merrill Lynch.
"What they did is, previously if you got that top spot on Google, the advertiser would have to pay a penny more than the guy that got the second spot," Kumar explained. "Well Google is saying now, it's not going to be that. You're going to pay what you bid and that's going to be huge."
For example, say a mortgage company wanted to advertise with Google and wanted to be at the top, the company would be paying more now. "What they're going to do is take what they see as the highest-quality ad and move it not to the side, but the top," Kumar said. "So you'll get great placement, you'll get great volume ... and instead of having to pay only a little bit more than the guy that got the second spot, now you're going to pay what you bid."
Judging on this, Cramer believes Google is a buy, he said.
Source:www.thestreet.com
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