Google's impressive Q4 2009 earnings report makes certain aspects of the business clear for all to see. For example, they report that revenues of $2.07 billion in revenue was generated by "Google partner sites through its AdSense program," and that "amounts ultimately paid to our AdSense partners" totaled "$1.47 billion in the fourth quarter of 2009".
Misleadingly, the report states that "TAC (traffic acquisition costs) as a percentage of advertising revenues" is 27%. True, but as a percentage of same-channel advertising revenues, it's 72%. There are virtually zero TAC's for "Google-owned sites."
Speaking of those Google-owned sites, they generated $4.42 billion, or 66% of Google's revenues.
In these numbers is the usual picture of impressive strength -- including the fact that the overall number of paid clicks rose 13% YOY (indicating continued success in optimizing page layouts while satisfying users) while click prices rose just above the rate of inflation, at 5% (indicating a leveling-off). But coupled with that strength is the interesting point that financially speaking, Google continues to provide only the illusion of a diversified company. It continues to do well, very well, based on its core cash cow. Elsewhere, it serves as a relatively polite intermediary that continues to face downward margin pressures.
The growth picture is an interesting mix: heavy investment in new areas like mobile (a longer road to profitability), and a relatively smooth path to continued growth simply by enjoying the great upside that remains in international markets in its core strength.
Which, in case anyone has forgotten, features the catchy advertising product: "Google AdWords."
The financial picture for GOOG remains very bright, but mainly because its core strength has such high margins, and Google (needless to say) owns the key "publication" (Google Search) outright.