Google: “I think we’re still in the first inning.”

“I think we’re still in the first inning.” Sergy Brinn on yesterday’s quarterly earnings call.

I gotta agree with Sergy. About 10 months ago we started using Google Adsense, and in that short time it’s gone from being spare change to a double digit percentage of our revenuesignificant double digit percentage in fact. If we’re just starting to make money from this thing, and many folks are asking me if they should try it, then I gotta think Google has a ton of growth in front of them.

Also, Google has opened up a whole new market for advertisers, “the dude market” as my friend Phil Kaplan would call it. Folks who have never bought online advertising, maybe never bought advertising in their life, are experimenting with text linksand it’s working!

Think about all the yellow page advertisers out there who now have computers in their office. Ten years ago they didn’t have a computer or an online connection and today they know how to do email, play poker online, do IM, and are generally super web savvy. They can now buy the advertisement for “Bay Ridge apartment” or “Bay Ridge plumber” or “Bay Ridge dog walker.” There is little to no waste and they can stop spending instantly if it doesn’t work. Why wouldn’t the micro-business and the soho (small office/home office) buy an advertisement Google? They will, and they are.

Clearly this is a growing market, so the question then moves from growth to competition. The issue with competition in this market is that you can’t get these small publishers to learn and adopt to many services. It takes an investment of time to get going with Google AdWords. Can you leave and be up and running on another service in a day? Sure. Will hundreds of thousands of advertisers do that? Not likely, unless someone does this much better and/or Google really drops the ball (not something I would bet on).

Sure, Yahoo Publisher Network will get a lot of users (I’m sure we will try it as well) but I don’t see people having more then three or four services on either the buy (Google Adwords) or sell (Google Adsense) side. If Google and Yahoo are two of those three that leaves onemaybe twomore major slots. All of these other ad networks are going to be consolidated down to five players in the next 24 months. Burst, FastClick, AdBrite, Kanoodle, etc. will all be bought in the next 12 monthsI’ve seen this story before (think ad software, web shops, etc).

We’re defiantly in the first inning, and we’re joined to Google at the hip for the duration as far as I’m concerned.

(note: I have no idea about their stock or if it is overvalued, undervalued, or priced appropriately. I do know that as their partner I love them. I love the way they email us back in 30 seconds, I love the way they send us our checks quicker then any other ad network, and I love the way they keep updating their software before we ask them to. I love them, I love them, I love them! That’s the point hereI’ve never worked with such a great company. So, if you buy stocks based on what their customers think then you’ve got one really impressed customer here. Do your homework, and go ask Kramer on Mad Money what he thinks of the stock price I can only tell you what I think of them as a partner).

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