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Google Mystery - Its Own Sites grew 32% & Partner Sites Only Grew 19%?

Tom Foremski asks the question in his blog post:

..Why are Google sites suddenly growing at nearly double the rate of partner sites when they have historically maintained near parity? What changed that could have produced such a massive boost?

Dave Morgan (CEO - Simulmedia) had even suggested the following 'thought' in his "Tweet" @ Twitter, that:

davemorgannyc Dave Morgan
Google [is] shifting its ad revenues to own sites, away from network partners sites?

Tom Foremski points out the following from Googler's Q2 Results:

Google's own sites, such as search, gmail, etc showed 39% growth in the most recent quarter compared with the year ago quarter, to $6.23 billion.

Google partner sites grew at nearly half the rate: just 20% compared with a year ago, to $2.48 billion.

This huge disparity between the growth rates of Google sites and partner sites is without precedent for most of its history. For example, in 2010, Google sites never exceeded the growth rate of partner sites:

- In Q1 Google sites grew 20% and partner sites grew 24%
- In Q2 Google sites grew 23% and partner sites grew 23%
- In Q3 Google sites grew 22% and partner sites grew 22%
- In Q4 Google sites grew 22% and partner sites grew 24%

Yet in Q1 2011 Google sites' growth jumped suddenly and without any explanation: Google sites grew 32% and partner sites grew 19%.

For some strange reason no one has picked up on this or noticed this huge change in its business model. There is no explanation from Google or Wall Street analysts that I could find.

I think that it's clear (and I had opined in my previous instapost), that with the renaissance of display advertising Google has proven to have got off to a flying start. -

I was referring to RTB & Google's clearly dominent early involvement. (But that's just my own observations.) - Meaning that the bulk of any of Google's revenue received from their DSP advertisers using Google's Invite Media operation (Google have also said Invite Media is 'on fire'), would then be passed on (through) to publishers attached to or, from partner RTB marketplaces. (In Google's Advertising Network)

Any other percentage commissions (for ad networks, Data providers, 'inter-connecting' management, etc) in being 'mulled together', would all be part of this downward pressure on what Tom Foremski & Google are calling, Google's "partner sites".

Taken from Google's Q2, this may be relevant to my own reckoning:

"Operating expenses leapt 49 percent to $2.97 billion in the second quarter, to about a third of revenue."

Note also, that:

Operating expense: $2.97 billion -- almost $1B more than last year's $1.99 billion figure. - And thats said to be down from last quarter's adjusted figure of $3.34 billion (which included a $500 million legal charge that Google took after it reported earnings).

Not - if you then 'back out' that $500 million legal charge.

Google also reported higher Traffic acquisition costs: $2.11 billion vs. consensus of $2.07

And as a comment made (by steven lessard), points out:

Taken from Page 37 of Google's April 2011 10-Q

< ..........."The margin on revenues we generate from our Google Network Members is significantly less than the margin on revenues we generate from advertising on our websites. - - Additionally, the margin we earn on revenues generated from our Google Network Members could decrease in the future if we pay an even larger percentage of advertising fees to our Google Network Members.">

Just my own thoughts, in answer to this mystery.


ps; Looksmart under 'extreme' (slow) accumulation, once again!

pps; "Trust us that this is for your benefit, we’re Google."

Disclosure: Long LOOK and happy to be so...