Google MoneyWith wild stock market swings becoming a fixture in recent weeks, the one that was brought on end of last week by Google’s unexpectedly strong Q1 earnings report – sending it’s stock up from $455 by almost $100 since Friday, is clearly worth a detailed look to all with an interest in seach marketing.

As CNET blogs, Google earnings may make Microsoft yearn more for Yahoo, but the real meat here is in the post’s Google quarterly earnings chart since Q1/2005. It shows that Google was making about as much all the way back then as Yahoo is expected to earn this quarter ($1.28-1.35 Billion).

Only Google has been killing it in these last three years, and just last week announced earnings of $5.2B.

You do the math, that’s about 4 TIMES as much as Yahoo.

But what is much worse, if the ComScore search engine stats have any semblance to reality at all, Google in e.g. December of 2007 had about 5.6 billion searches (a 30% year-over-year gain) to Yahoo’s 2.2 billion, or only 2.5 times as many. That means they are monetizing searches much more efficiently.

And this is the big damn secret that often gets overlooked by the mainstream media, including the financial analysts, because they do not understand paid search and it’s offspring very well:

Google is refining the efficiencies of their Adwords and Adsense offerings at an alarming rate (if you are one of their search competitors).

Last year alone, they tweaked the core algorithm 450 times! That’s more than once a day…

And the manual stuff gets even weirder…

And that’s not even mentioning the other, more "manual" things that they have done more and more since last year. Such as "firing warning-shots" across the bow of various people trying to game the system, such as "link farms" and Adsense arbitrage garbage pages, etc.

For example by introducing whole-sale Page Rank penalties for entire such link networks, and through the by now famed "Google Slap" (actually there were a number of these in ‘07) where partially manual quality scores could drive you out of the Pay-Per-Click bidding due to massively increased bid prices for offerings deemed as low quality in Google’s eyes.

In fact, recently there have been people trying to devise entirely new strategies to stay in Google’s good (quality) graces from the very beginning with a new Adwords account/campaign (check out the video here, the meat is in the second half).

Arcane stuff to most, I know, but this is the only explanation for how Google has managed to have such a stellar Q1 result despite the doubts in the market that had come from the flat to declining Paid Clicks numbers put out by ComScore the first few months of this year:

While there is certainly some declines in growth due to the current economic environment, Google itself has been cutting into the "inflation" of low-value clicks and low-click-through ads aggressively, shoring up both its per-click and per-search returns.

And while ComScore is scrambling trying to explain the Google discrepancy, it actually appears to be mostly blind to these finer points of how Google operates. Even the Alley Insider didn’t get it a few months ago.

Back to our regularly scheduled programming: Micro-hoo…

So what does all of this mean for Microsoft’s attempt to take over Yahoo? Nothing good. MSN + LiveSearch + Yahoo Search does not in itself equal a viable position vs. Google. The only thing that could work is the idea floated by Henry Blodget to have MSN/LiveSearch spun off into Yahoo plus $10B in return for a 50-51+ % stake.

There would at least be a chance that Yahoo, powered with Microsoft money from its still flush MS Office coffers, might innovate its way out of the current predicament for both companies.

But hearing from my sources how Yahoo just recently internally killed a very innovative new social network-cum-wiki proposal, plus the recent brouhaha over the lame, "is-it-a-spoof-or-not", lame, internal Microsoft Vista sales team video, I wouldn’t bet on it.