Google expects strong growth in advertisingOctober 20, 2004 Google expects to add well over 350,000 new advertiser accounts until 2008, according to internal documents obtained by The Chronicle. The growth reflects the search engine's confidence in remaining a beacon for online marketing. But it also illustrates the maturing of the search industry because the rate of adding accounts is expected to slow over time. Google, in Mountain View, will be in the spotlight Thursday when it issues its first quarterly earnings report as a public company. Analysts will be looking for any indication about its future. Larry Page and Sergey Brin, Google's two maverick founders, have vowed to provide little help. They said that they will talk only about broad trends in their industry, not the company's financial outlook.
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 "A management team distracted by a series of short-term targets is as pointless as a dieter stepping on a scale every half hour," the founders explained in their now-famous letter to shareholders earlier this year. Analysts who follow Google grumble about the decision. They must rely on their own calculations to evaluate the stock rather than getting guidance from management. Everyone agrees that Google is expanding rapidly. The questions are how much and for how long. The internal Google documents obtained by The Chronicle give unusual detail about the matter. They include advertising forecasts that have not been publicly disclosed. Google predicted that the number of advertiser accounts will jump from 280,000 this year to 378,000 in 2005, according to the documents. From 2004 to 2008, the number of accounts is expected to more than double to 652,050. Google made the forecasts as part of its specifications for a new billing system that was to be built earlier this year by BFS Finance, a subsidiary of the conglomerate Bertelsmann AG. The numbers, labeled "assumptions," were intended to help in designing the project. A Google spokesman declined to comment other than to say that the company has thousands of advertisers. The figures in the documents show that Google expects to continue adding clients at a rapid pace. They also reflect the difficulty of maintaining the current expansion rate, analysts said. Google expects its advertiser accounts to grow 35 percent between 2004 and 2005, according to the internal documents. However, Google estimates that the growth rate will decline to 15 percent between 2007 and 2008. "Clearly, adding close to 100,000 customer accounts per year is pretty significant," said Scott Kessler, an analyst for Standard & Poor's. "But the number of customer accounts is going to be increasingly less relevant over time." Kessler said Google's future growth will be tied largely to higher ad prices. Customers will bid up the price of the ads, putting more money in Google's pocket, he said. That's already happening in the search industry overall. A study by Morgan Stanley showed that ad prices for queries with two or three words, such as "APR credit card," nearly doubled to $1.84 per click between April 2003 and March.
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 Google sells ads on its Web site and those of its partners. They are increasingly featured in areas outside traditional search such as Google's e- mail and blogs. Companies of all sizes advertise on Google. They range from small mom and pops that sell political novelties to corporate giants such as EBay, Target department stores and Sam's Club discount retail warehouses. Google's future growth also depends on luring new users and expanding its ad network to new products, Kessler said. Recent releases include a feature that allows users to search books from cover to cover and desktop search software to help users sort through documents and e-mail on their hard drives. These new products don't yet include ads. However, analysts believe they will soon. Google's internal documents don't explain how the company forecast the growth in advertiser accounts nor were any related revenue figures disclosed. There was no way of telling whether the numbers have been updated since they were published. Google held its high-profile initial public offering in August, selling its shares for $85. Since then, the stock has soared 74 percent, finishing regular trading at $147.94 Tuesday. Google will follow Wall Street tradition in hosting an earnings conference call, scheduled for Thursday at 1:30 p.m. Management is expected to make a presentation and answer questions. That Google's executives refuse to give financial guidance hasn't stopped analysts from making their own predictions. Those polled by Thomson/First Call expect the company to earn an average of 54 cents per share for the third quarter, excluding unusual items. Analysts had expressed some doubts about Google after its last earnings report, which came out while it was still a private company. The firm's revenue increased 11 percent from quarter to quarter at the time, far less than previous quarters. Yahoo's third-quarter results, reported last week, have revived confidence in online advertising. The Sunnyvale Web portal met Wall Street expectations with the help of a robust advertising revenue, then modestly raised its financial guidance. Google isn't alone in declining to provide financial guidance. A few other companies follow similar policies, including the Washington Post Co. and IAC/InterActiveCorp., which controls several Internet companies including online travel agent Expedia. David Garrity, an analyst for Caris & Co., said Google may eventually be pushed to make some disclosures about its future. He said they would help analysts and investors hold Google's management accountable for reaching certain targets.
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 "At some point in time, there will have to be some sort of milestones," Garrity said. "They don't necessarily have to be financial, but people want to have some idea of what the company is shooting for." Google's advertisers Here is Google's internal forecast of how many advertiser accounts it will have.
2004 - 280,000 Source: SF Gate 
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