August 20th, 2009
Goldman goes ga-ga for Google, cites YouTube, Europe and display ads
Goldman Sachs figures Google will come out of the downturn with revenue growth rates in the mid-teens in 2010.
Goldman Sachs added Google to its “conviction buy list” with a 6-month target of $560. Overall, the investment firm sees Google excelling in Europe as travel and e-commerce grows across the pond. Meanwhile, Google will benefit from better monetization for YouTube and grow display advertising via DoubleClick. Goldman analyst James Mitchell said:
We estimate Google’s display revenue could grow 40% yoy in 2010 and add 2 points to overall revenue growth.
Of course, a lot of this growth comes from easier comparison—2009 has been weak relative to Google’s typical standards.
Among the key points from Mitchell’s note:
- Google’s international revenue—53 percent of the total—may recover at the same time as U.S. ad sales. In addition, Google’s international revenue growth re-accelerated in the second quarter.
- Europe is promising for Google since paid search adoption is in an early stage.
- Display advertising can be a positive since it can grow off of a smaller base and isn’t used enough on YouTube.
- YouTube can become a display ad juggernaut. Mitchell wrote:
Based on its published rate cards for banner advertisements and assuming high utilization rates on the home page, we estimate YouTube’s advertising revenue at around $300 mn in 2009. We believe YouTube revenue will grow at 40% yoy or faster in 2010 as YouTube is generally under-monetizing its home page traffic versus peers, and as its home page is a natural venue for studios to advertise new movies.
Also see: Google moves to show YouTube has ‘a very credible business model’
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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