Google Inc Algorithm Change Hurts RetailMeNot Inc Shares

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Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL)’s new initiative to weed out spammy sites from its search results is taking its toll on RetailMeNot Inc (NASDAQ:SALE) stock, which declined a record 19% on Thursday, following a report that the Internet company has altered its search algorithm making Web couponer 33% less visible, according to Bloomberg.

Searchmetrics listed all the sites which are winners and losers based on the new algorithm, and RetailMeNot is the biggest loser.

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“These reports greatly overstate the impact on RetailMeNot.com,” the Austin, Texas-based company, said in a statement on the changes.” The company further said that it is too early to assess the impact of Google’s algorithm change, as traffic has also fluctuated previously owing to periodically implemented algorithm changes.

The plummet in the shares of RetailMeNot Inc (NASDAQ:SALE) reflects the dominance of Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) in the Internet world, and the risk faced by the companies that are dependent on the largest search engine for users. In March, out of 100% search queries in the United States, 68% were garnered by Google, which is three times more than the market share of Microsoft, according to ComScore Inc.

Matt Cutts, head of Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL)’s webspam team, posted on his Twitter on May 20th that the Mountain View, California-based company was showcasing its new algorithm called Panda 4.0. Following this, Searchmetrics said in its post that the update seems to be a major one.

Overreaction from investors

According to Brian Pitz, an analyst at Jefferies the stock decline was an overreaction and the real impact is not that grave. Pitz has given a Buy rating to RetailMeNot citing that the company has come out smoothly from algorithm changes in the past.

Jason Freidenfelds, a Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) spokesperson said that company won’t release any statement on the specific sites. He did mention that the algorithm change will affect around 7.5% of the queries in English that users might notice.

RetailMeNot Inc (NASDAQ:SALE) dropped $5.81 to $25.23 at the close in New York, and the 19% decline was the biggest one-day decline since the stock started trading in July. The online website offers coupons to over 70,000 stores and brands such as Sears Holdings and Walgreen, travel sites like Expedia and fast food restaurants like Burger King. The majority of users reach RetailMeNot website while searching for coupons on Google.

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