Google Inc. inadvertently published outdated revenue and profit projections on its Web site after last week’s meeting with Wall Street analysts, the company said in a regulatory filing Tuesday. But it stood by its refusal to issue financial projections.
The previously undisclosed presentation notes stated that Google’s core advertising business was expected to grow by nearly 60 percent to $9.5 billion in 2006 but that profit margins in its mainstay AdSense business could be squeezed this year and beyond.
Google, a provider of Web search technology, said in the filing with the U.S. Securities and Exchange Commission that the notes stated: “To really get down to brass tacks, we’re going to: Execute well on our core ads projects to help us exceed the $9.5bn target (and backfill any AdSense partner loss) and drive advertiser satisfaction.”
It said in the filing that the notes had been presented early in the fourth quarter of 2005 for an internal product strategy presentation.
“These notes were not created for financial planning purposes, and should not be regarded as financial guidance. Consistent with past practice, Google is not providing revenue guidance,” Google said in the filing.
Google also described as inaccurate notes that said: ”AdSense margins will be squeezed in 2006 and beyond.”
AdSense is an advertising program through which Google offers its pay-per-click Web search advertising system to Web publishers such as America Online or Ask.com to sell search-based advertising on their own sites.
Following its annual “Analyst Day” presentation for Wall Street at its Silicon Valley headquarters last Thursday, Google published, then retracted, a massive document containing slides with “speaker’s notes” on product plans and financial targets.
The document came to light when blogger Greg Linden of Seattle picked up details from it. According to a number of bloggers who captured the original presentation, it also described an unannounced plan to offer online storage to Web users, creating a mirror image of consumer hard drives.
The bloggers said the original presentation stated: “With infinite storage, we can house all user files, including emails, web history, pictures, bookmarks, etc and make it accessible from anywhere (any device, any platform, etc).”
Jordan Rohan, an analyst with RBC Capital in New York, calculated in a note to clients that, assuming the internal targets were made before Google signed a $450 million advertising contract renewal with AOL, then the company’s internal targets are for around $10 billion in gross revenues.
That’s in line with his 2006 estimate of $9.97 billion, the current high prediction on Wall Street and ahead of consensus Wall forecast of $9.65 billion, according to Reuters Estimates data.
“We believe Google management is creating unnecessary volatility by refusing to issue financial targets (intentionally). Issuing guidance is not ’evil,”’ he said.
“They are certainly demonstrating a hypersenstivity to what information they do disclose,” said David Garrity, director of research at brokerage Investec in New York.
Google spokeswoman Lynn Fox said Tuesday that the company did not have any further comments on this topic. However, Monday Fox confirmed the existence of the notes that were on the company’s Web site but declined to comment on details contained in them.
Google replaced the withdrawn notes with a 94-page version of the slides in another format that had been cleansed of the notes.