Friday, October 16, 2009

Google Signals Economic Recovery?

It is said that online advertising is one of the earliest to feel economic recovery as companies can literally increase their online advertising spending overnight. If companies are confident enough to add more discretionary expenses such as advertising, it is safe to say that the heart of the economy may be starting to beat again.

The largest online advertiser in the world, Google felt the heartbeat good on Friday. It not only posted higher-than-expected third-quarter profits and revenues, but also said it was looking for major acquisitions and could buy a large company "maybe every year or two."

Google's CEO Eric Schmidt said large advertisers were more eager to spend on search ads in the third quarter and consumers shopped more online, helping the Internet company notch its strongest quarter-on-quarter revenue growth since 2007's final quarter, underscoring improving economic conditions.It said both the amount of money that advertisers pay for the text ads that appear alongside search results as well as the number of clicks on those ads by Web surfers increased quarter-over-quarter.
Google's net revenue in the third quarter -- excluding traffic acquisition costs, or the money that Google shares with partners -- rose 8.5 percent from a year earlier to $4.38 billion, beating the $4.24 billion expected by analysts.

Net revenue also grew quarter-on-quarter for the first time this year, after being roughly flat in the second quarter and falling for the first time ever in the first quarter.

Net income was $1.64 billion, or $5.13 a share, compared with $1.29 billion, or $4.06 per share, a year earlier, thanks in part to ongoing cost controls at the Mountain View, California company.

Excluding special items, profit per share was $5.89, beating the $5.42 expected by analysts, according to Thomson Reuters I/B/E/S.

Like almost every other business these days, things are "getting better" but still not good enough.Google's revenue growth had slowed to just 3% in the second quarter from a year ago, compared with 31% growth in all of 2008. Google said cost per click, the amount advertisers pay when people click on an ad, fell 6% from a year ago but rose 5% from the second quarter. Analysts took that as a positive sign.


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