Google Growth Slows During First Quarter of 2009

Despite a slight dip in revenues to start the fiscal year, Internet search giant Google (News - Alert) claimed a good quarter “given the depth of the recession” and touted the resilience of its business model during an earnings call today.

 

After beating the street in Q4 2008 despite an all around miserable economic climate, the Mountain View, Calif.-based search giant released first quarter financial earnings that brought it a bit closer to Earth with revenues dropping 3 percent quarter over quarter. However, revenues grew 6 percent year over year on the back of continued search query growth, according to Eric Schmidt (News - Alert), CEO of Google.

 

“These results underline both the resilience of our business model and the ongoing potential of the web as users and advertisers shift online," Schmidt said on the company’s first quarter earnings call. "Going forward, our priority remains investing for the long term to drive future growth in our core and emerging businesses.”

 

While the company did squeak out an increase in profits for the first quarter, Google’s revenue growth slowed to an all time low since the company went public nearly five years ago.

 

The company reported revenues of $5.51 billion for the quarter ended March 31, 2009, an increase of 6 percent compared to the first quarter of 2008 and a decrease of 3 percent compared to the fourth quarter of 2008. Google earned $1.42 billion, or $4.49 per share which marked a 9 percent increase from $1.31 billion, or $4.12 per share the same time last year. After hour trading saw Google shares climbed $20.26, more than 5 percent, after ending the regular session at $388.74.

 

While the numbers aren’t world beating, the company is projecting a significantly brighter outlook than many of its rivals including Yahoo which recently projected that sales fell as much as 16 percent year-over-year in the first quarter. During the same period, Time Warner’s (News - Alert) AOL unit also hit the skids, decreasing 19 percent in sales from the first quarter the previous year.

 

And the online play is certainly doing better than other traditional ad-driven media outlets such as newspaper giant Gannett which took an 18 percent hit in lost revenue in the first quarter of 2009.

"No company is recession-proof," said Schmidt on the call. "Google is absolutely feeling the impact."

 

As TMCnet previously reported, Google announced Q4 2008 revenues of $5.7 billion for the quarter representing an 18 percent increase year-over-year and 3 percent sequentially, GAAP net income for the fourth quarter fell to $382 million from $1.29 billion the prior three months, and GAAP earnings per share fell from $4.06 to $1.21.

 

It was perhaps telling that for the first time Google began slashing jobs during the first quarter, eliminating 340 positions which equaled almost two percent of its entire workforce. In addition, the notoriously quirky perks that once attracted so many to the Silicon Valley work style were dropped in favor saving money.

 

Greg Sterling, founding principal of Sterling Market Intelligence, a consulting and research firm focused on online consumer and advertiser behavior, told TMCnet that when compared to its own peer group Google’s numbers reamain the bellwether and could bolster a sagging tech market.

In fact, as global economies continue to wend there way through what is now an extensive malaise, it remains hard to predict where spending is being cut back, says Sterling. On the online ad front, which is estimated to be 97 percent of Google’s total generated revenues, some forecasters are predicting a 5 percent decline in the United States in 2009.

 

“Relative to the traditional media landscape where companies are really suffering with some of these dollars shifting to online spending, Google remains the  center of the best perform segment,” said Sterling.

 

On the upside, according to Google execs, Google-owned sites generated revenues of $3.70 billion, or 67 percent of total revenues, in the first quarter of 2009. This represents a 9 percent increase over first quarter 2008 revenues of $3.40 billion and a 3 percent decrease from fourth quarter 2008 revenues of $3.81 billion.

 

The company also continued to generate increasing revenues through partner sites with its AdSense programs, which totaled $1.64 billion, or 30 percent of its overall revenues, in the first quarter of 2009. This represents a 3 percent decrease from first quarter 2008 network revenues of $1.69 billion and a 3 percent decrease from fourth quarter 2008.

 

Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 17 percent over the first quarter of 2008 and increased approximately 3 percent over the fourth quarter of 2008.

 

And Google picked up a little steam in the international market with revenues from outside of the United States totaling $2.88 billion, or 52 percent of total revenues in the first quarter of 2009, compared to 51 percent in the first quarter of 2008 and 50 percent in the fourth quarter of 2008.

           

However, points out Sterling, Google remains among the world's most profitable companies and most likely will remain that was as it capitalizes on its search engine, which processes nearly two-thirds of all Internet queries.