Here Are The Key Takeaways From Google's Big Earnings Miss

This post is from BI Intelligence, our new industry research and analysis service. The service is currently in beta. For more information, and to sign up for a free 30-day trial, click here. In scrambling to explain why they were wrong about Google's quarter, most analysts are blaming "expectations" (translation: We weren't wrong--it was you idiots who were wrong.)They're also pointing out that the quarter wasn't as bad as it looked.And the latter point is true.But there are still a couple of key concerns about the quarter, both of which could have long-term implications for the company.

• Google's core search business slowed more sharply than expected, even in the U.S. Analyst Ben Schachter from Macquerie was one of the few analysts to point this out. Google's display business grew faster than expected, but this only meant that the core search business was even weaker than it looked. This slowdown, moreover, was not just the result of mobile usage affecting click prices. In the U.S., it was also not the result of foreign exchange rates. 
• Mobile search, which is accounting for an ever-bigger percentage of overall searches, is less profitable than standard PC-based search--and this is not likely to change. Many analysts dismiss lower keyword prices for mobile search by saying the mobile search market is just immature. This misses a key point. Except for location-aware local commerce searches, most mobile searches do not result in incremental spending by searchers. They merely shift the spending from the PC to the mobile device. Also, mobile search distribution is, at least for now, more expensive than Google's PC-based distribution.

On the growth slowdown...The growth of Google's overall business slowed from 33% in Q3 to 25% in Q4. Most of that slowdown was the result of international, which slowed from 41% growth to 28%. But the US slowed, too. Q3 growth in the US was 26%--about the level it maintained the entire year. Q4 growth in the US, meanwhile, slowed to 23%.Anecdotally, we have heard that one big challenge that Google is facing these days is that Amazon is starting to have an increasing impact on revenue from product searches, which have been a critical generator of Google's growth over the past decade.Amazon could be affecting product-search revenue in two ways:First, as Amazon grows and offers a more comprehensive and informative product selection, more people may be starting their product searches at Amazon. This would cut Google out of the process entirely.Second, Amazon itself is now selling third-party product-keyword ads on its product search pages. (See below). These ads could be skimming off spending that might historically have gone to Google.  If Amazon continues to become the first stop for more and more online product searches, this could begin to bite into a very lucrative part of Google's revenue stream. And Amazon, unlike some general search providers, is not going to fold up the tent and go away.