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Apr-18-2008

Google Soars Most Since IPO; Profit Trumps Estimates (Update3)

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CONTENTS:

Reuters Estimates expected revenues of $5.13 and net income of $4.53 per share, but Google reported profit of $4.84 a share, excluding one-time items and stock option expenses. (More...)
Hitwise, for example, says Google has a 67 percent share of the search market, while comScore reads it at 60 percent. (More...)
April 18 (Bloomberg) -- Google Inc. posted the biggest gain since its initial public offering after profit trounced analysts' estimates, spurred by overseas growth and a bigger-than-predicted jump in the number of users clicking on text advertisements. (More...)
Investors have worried that a consumer slowdown could affect online advertising, which represents about 99% of Google's revenue. (More...)
Google has vastly reduced the number of ads on a page in the hope of better targeting. (More...)
Good afternoon, everyone and welcome to today'''s first quarter 2008 earnings conference call. (More...)
"I don't think that kind of foreign currency benefit was expected,'' said Jane Snorek, who helps manage more than $70 billion in assets at First American Funds in Minneapolis. (More...)
On the search results page, click "Transcripts" to filter the results to show transcripts only. (More...)
Some analysts say the company won't take much of a hit, because direct marketing outsells brand-promotional ads during recessions. (More...)
"The mobile ads work very well. (More...)

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Reuters Estimates expected revenues of $5.13 and net income of $4.53 per share, but Google reported profit of $4.84 a share, excluding one-time items and stock option expenses. TAC (traffic acquisition costs), or payments made to sites such as AOL and MySpace to run its ads, was $1.49 billion, putting net sales at $3.7 billion. Paid clicks, which is where Google made the bulk of its $16.7 billion last year, increased 20 percent over the first quarter of 2007. This figure quelled analyst fears triggered after a ComScore report found that Google posted only a 2.7 percent gain in paid clicks from March 2007 to March 2008. On the first-quarter conference call April 17, Citi Investment Research analyst Mark Mahaney asked whether or not Google expects its declining paid-click rate, which dropped from 30 percent growth in the fourth quarter, to stabilize. [1] Many analysts expected lower results after market tracker comScore reported that paid clicks on Google's U.S. sites rose only 1.8% in the first quarter from the year-earlier quarter. That compares with 25% growth in the fourth quarter and 48% in the third. Google collects revenue from advertisers based on those ad clicks. Google said its total paid clicks rose 20% last quarter. It didn't break out paid clicks just for the U.S. But on a conference call with analysts after Thursday's report, Google CEO Eric Schmidt said, "It's also interesting to note that paid-click growth is much higher than had been speculated by third parties." Late last year, Google said it would tweak its software algorithm to get a better read on valid paid clicks, and that the change would affect the paid-click count. That -- not the slow economy or any problems with Google -- accounted for comScore's report, says Youssef Squali, an analyst for Jefferies Co. "The internal cleaning of the paid clicks is the right strategy, it's just difficult to do it at a time when overall growth rates are coming down," Squali said.[2]

Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 20 percent over the first quarter of 2007 and approximately 4 percent over the fourth quarter of 2007. I'm tempted to make a sarcastic remark about the bipolar state of stock investors, but I'll save the snark for another day. (Maybe it's time to do a deep dive on ComScore and its discontents?) Following the earnings report, investors bid up the company's shares more than 75 points in after-hours trading. This was a blast from the (not-so-distant) past when you could nearly guarantee Google's shares would soar following the release of its quarterly results.[3] According to analysts surveyed by Thomson Financial, Google is expected to report first-quarter revenue of $3.61 billion when certain payments to partners are factored out, a 6.5% increase from $3.39 billion on that basis in the fourth quarter. Google declined to comment on the comScore data or its earnings report. When it posted its fourth-quarter earnings on Jan. 31, Google CEO Eric Schmidt said the company hadn't seen any impact from macroeconomic softening. In public comments since then, Google executives have said it isn't clear yet whether those problems will hurt its business. Since going public in 2004, Google has sworn off giving any detailed public earnings guidance, which increases the difficulty of assessing any risks to its performance. That's a major reason investors turn to comScore's search-ad click data, despite analysts' warnings that the data haven't always predicted Google's results reliably in the past. "The comScore click data has been a huge focus for the investment community and probably has been one of the bigger influences on the stock this quarter," says John Aiken, managing director of Majestic Research in New York.[4]

Analysts expect earnings of $4.52 a share on sales of $3.61 billion, a top-line growth rate of 42 percent over sales in 2007. Silicon Alley Insider's Henry Blodget said he believes the current consensus revenue estimates could be met with U.S. growth of 25 percent in the first quarter, down from 40 percent in the fourth quarter, which would allow for significant deceleration in the quarter. "This 25 percent growth estimate obviously assumes that Google has seen a strong increase in price-per-click: If it hasn't, and the ComScore data is accurate, U.S. revenue will miss by a mile and Google's overall revenue will come in well below consensus," Blodget wrote April 15.[5]

Google's text ads are geared to correspond to search results, presenting ads at what the company calls the "magic moment" when a person's search can indicate interest in a specific subject. Google has been concentrating on showing fewer ads but making them better-suited to search results, a move it hopes increases the revenue generated by each click. Statistics from ComScore released this week show that compared with the fourth quarter of 2007, paid-click growth slowed in the first quarter for Google and Yahoo and that paid clicks flat-out declined for Microsoft's MSN.[6] ComScore said that in the first quarter, Google's paid clicks rose only 2 percent year-over-year, a sharp drop from the 25 percent growth in the fourth quarter of 2007 and 48 percent in the third quarter of 2007. Since Google typically gets paid by the click, any stall in those clicks would be significant. This "marks a significant deceleration," Bear Stearns said in a report last week. In announcing its results, Google said its paid clicks, which include search ads and the ads it delivers to third-party sites, had increased 20 percent from the first quarter of 2007.[7] Comscore had Google's U.S. paid clicks up 1.8 percent in the first quarter from the fourth quarter. It's not unrealistic to assume that international paid clicks brought Google's overall average growth to 4 percent. Google management talked about how its search tweaks helped international search results.[8]

As the search engine giant's income leapt to US$1.31bn for this financial quarter, its revenues increased year-on-year by 42pc to US$5.19bn. While third parties including net analytics firm ComScore reported that Google's revenue from paid click advertising was rapidly falling, the company noted that aggregate paid clicks, including clicks from ads on Google sites and the sites of their AdSense partners increased by about 20pc in the first quarter of 2007, and by a further 4pc in the fourth quarter.[9] The following quarter, however, paid-click growth slowed to 30%. Some analysts maintain that this decline is by Google's own design. The company has been trying to eliminate fraudulent clicks, where advertisers purposely link to the ads of their competitors in order to jack up their rates. It has also been trying to minimize accidental clicks, or clicks that take users to sites they didn't intend to visit. Jeffrey Lindsay, an analyst for Sanford Bernstein, further noted in recent research that Google is attempting to get rid of low-quality clicks, which result from Web site publishers trying to game the system by buying up low-cost keywords through Google's AdWords program and selling them to advertisers at a low price. "We think Google has recalibrated its AdWords algorithm and is'slapping' low-quality advertisers and arbitrage marketers off its search results pages," Lindsay wrote. "This is driving down paid clicks, which comScore is detecting, but it is also driving up keyword pricing, which comScore does not measure."[10] Analysts surveyed by Bloomberg had expected per-share earnings of $3.96. The company's results surprised some analysts who had speculated that the economic slowdown would weaken Google because its advertising business is so enmeshed with the economy. Their fears were based in part on results from ComScore, a Reston firm that tracks Internet use, showing that the growth in the number of "paid clicks" people were making on Google's search ads was rapidly slowing.[7] For a company that has made a mint tabulating the Internet's vast content, Google sure is cagey about its own numbers. That's why a report released by another company, ComScore Inc., received tremendous attention Wednesday. It showed continued deterioration in the growth rate of Google's "paid clicks"how often people opened an advertisement that runs alongside Google's search results. Until Google releases its own quarterly earnings Thursday afternoon, no one knows for sure if there is cause for concern with one of technology's key companies.[11]

"We know that if we can improve aggregate quality, we know the value of a click, number of clicks and so forth will grow and will grow at whatever the technology will allow, so if you look, our absolute growth rate has been very, very significant," Schmidt said. More broadly, Schmidt said Google doesn't see its position weakening in the face of any macroeconomic softness. "We've looked at this really carefully, and we don't see an impact as of this time," Schmidt. Should the economy soften, he said Google would weather it well because its business is so focused on search, ads and applications. Schmidt also declined to comment on the recent partnership with Yahoo, in which the Internet company is running Google ads alongside its own search results, ostensibly as a deterrent to Microsoft's bid to buy the company.[1] Wall Street started worrying about Google's growth last quarter, when it missed analysts' earnings estimates by a penny, despite posting a 17% jump in total earnings for the quarter. In its fourth-quarter earnings call, Eric Schmidt said Google's earnings were hampered by improvements to its search engine aimed at weeding out junk ads that pop up alongside search results. He dismissed suggestions that the slowing economy was to blame for Google's lackluster results. Declining clicks and missed earnings prompted many analysts to lower their first-quarter estimates by 12 cents a share on average. Were they ever wrong.[12] Google's stock soared by nearly $80--more than 17%--in after-hours trading after the search giant delivered first-quarter results for revenues, paid-click growth and earnings that exceeded Wall Street's expectations. "It's clear to us that we're well positioned to thrive, regardless of the business conditions that surround us," said Google CEO Eric Schmidt, shrugging off concerns about a sluggish U.S. economy.[13] What recession? Google yesterday reported a 30 percent increase in first-quarter profit, easing investor concerns that the technology company's ascent would be slowed by a weakened U.S. economy. The Mountain View, Calif., company attributed the performance, which exceeded analysts' expectations, to growth overseas and improvements in its formula for delivering ads alongside search results and on third-party sites. "It's clear we are well positioned for 2008 and beyond, regardless of the business environment we are surrounded by," chief executive Eric E. Schmidt told analysts during a conference call.[7]

Now, following a series of monthly reports on the company's growth in "paid clicks" (the frequency of users clicking on an ad via Google's search results) the Street -- and investors -- have taken a more cautious tone. Analysts have revised both their price targets and first-quarter estimates, while investors brace for what the company's paid click data will mean for its first-quarter results.[10] "The latest data for March doesn't move the needle much in terms of expectations for the quarter," said Douglas Anmuth of Lehman Brothers. He argued that the decline in ad-click growth earlier this year can be chalked up to fewer clicks in the name of better results. Other analysts aren't so sure. Brian Bolan of Jackson Securities lowered his Google estimates in part because of the early comScore numbers. Jason Helfstein of Oppenheimer, while maintaining his outperform rating on Google, acknowledged that the decline "could also be due to fewer clicks by consumers slowing their spending or by advertisers requesting fewer paid clicks." Both are persuasive arguments. Google will have to give evidence today that its two months of declining clicks this year came in the name of more efficient ads.[14]

Depending on which ratings service you believe, Google is either leaving Yahoo in the search dust, or Yahoo is finally gaining on Google. Those looking for a fresh angle thought they found it when comScore revealed data on its sponsored clicks. Consumers clicking through to such revenue-generating links dropped 7 percent in January compared with December and were flat over the past 12 months. They fell even further in February. That data overlooked the simple fact that the first quarter is seasonally slow and that the decline in paid clicks happened because Google had started factoring out accidental clicks. This move, meant to benefit advertisers, was potentially evidence of how smart Google had gotten about user activity. All that was overshadowed by investors' hunger for a metric to hang their hats on. Aiding those bulls, the paid-click declines ended in March. Some analysts looking for a strong quarter from Google noted that reversal to make their case.[14] SAN FRANCISCO--Shares in research firm comScore Inc. fell more than 8% in after-hours trading following Google Inc.' s announcement of search advertising data that differed from comScore's estimates. Reporting earnings, Google said that consumer clicks on its advertisements during the first quarter increased 20% from a year earlier. That was significantly greater than comScore's Tues. estimate of 1.8% growth in U.S. clicks from a year earlier. Differences in what they measure likely account for at least part of the discrepancy.[15] Growth in one of Google's key money-making areas has slowed almost to a halt, calling into question its business model and the future direction of its business. Latest data from internet research house comScore shows that the level of U.S. visitors to the search engine "clicking through" to adverts carried by Google has slowed from a growth rate of 25pc in the fourth quarter of 2007 to just 1.8pc in the first quarter of this year.[16] The result firmly dispel theories for the time being that the company's growth was beginning to slow, in part because of the downturn in the U.S. economy. The rise in paid-for clicks is important because Google makes most of its money in this method, a method which some feared had begun to slow down in recent months. Online research house comScore had published surveys which suggested Google's growth rate in U.S. paid-for clicks had slowed from 25pc in the fourth quarter of 2007 to 1.8pc in the first quarter of this year.[17]

Mountain View-based Google (NASDAQ: GOOG) saw U.S. paid clicks rise 2.7 percent in March compared with the same month last year, and clicks in the first quarter were up 1.8 percent compared with the year-ago quarter. Those figures show a decline from Google's fourth-quarter growth rate of 25 percent and its third-quarter growth rate of 48 percent.[18]

ComScore's numbers also show that Google's paid clicks for the first quarter grew just 1.8 percent from the year-ago period, a huge drop from the 25 percent paid-click growth from the fourth quarter in 2007.[5] Google said paid clicks increased 20 percent over the first quarter of 2007 and 4 percent over the fourth quarter of 2007. Google and ComScore use different methods to measure paid clicks--for example, Google reports global numbers compared to U.S. tallies from ComScore--so it's not possible to directly compare Google's 20 percent quarter-over-quarter increase to the 1.8 percent increase ComScore reported for Google for the same period.[6]

Schmidt also took a moment to dismiss recent reports that Google's paid click growth was flagging. "Paid click growth is much higher than has been speculated by third parties," he said. Google reported that paid clicks on its sites and partners' sites grew approximately 20% from the first quarter of 2007 and 4% from the fourth quarter of 2007.[19] Worries that Google (nasdaq: GOOG - news - people ) was losing its edge were dispelled when the tech giant reported surprisingly strong first-quarter earnings after the bell on Thursday, buoyed by favorable exchange rates and strong international sales. Google reported aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its partners, increased approximately 20.0% over the first quarter of 2007 and approximately 4.0% over the fourth quarter of 2007.[12]

In the fourth quarter of 2007, paid clicks grew by 30 percent, and by 45 percent in the third quarter. Google has been arguing that while paid-click growth has slowed, the sponsored text ads are producing higher revenues because the company is diligently working to improve the quality of those results. If the clicks have more relevance, they should generate more revenue.[20] Reduced growth in paid clicks can be attributed to improved technology that eliminates irrelevant promotions, Nick Fox, a product manager at Google, said in a February interview. While the company is showing fewer ads alongside query results, consumers are more likely to click on those links, he said. That's lifting the price per click as much as 30 percent, according to Colin Gillis, an analyst at Canaccord Adams in New York. He recommends buying the shares, as do 31 of 36 analysts surveyed by Bloomberg.[21]

Something else to watch out for: "Google'''s PF EPS of $4.84 was significantly higher than consensus of $4.52, but approximately 22 cents of the 32 cents beat was attributable to a lower tax rate and lower share count." Even though paid clicks came in well ahead of comScore, they are slowing no matter how you slice it: "20% growth does represent a deceleration from 30% Y/Y growth in 4Q and given the company noted no material impact from macro-effects in the quarter, a continuation of this deceleration moving forward could cause concern."[22] ComScore also reported paid clicks falling overall, including at Sunnyvale-based Yahoo Inc. (NASDAQ: YHOO) and Redmond, Wash. -based Microsoft Corp. (NASDAQ: MSFT). Google is planning to report its first-quarter financials Thursday, and analysts expect, on average, earnings of $4.52 per share on revenue of $3.61 billion.[18] Google, whose Internet query market share was 59.8 percent in March, also posted only a 2.7 percent gain in paid clicks from March 2007 to March 2008, according to data issued by ComScore April 15. Google made the bulk of its $16.7 billion in 2007 from paid clicks, which come from the links on its Web pages it services. Normally, a gain in paid clicks is viewed positively, but this is the third straight month ComScore has signaled weak numbers in this area.[5]

The better-than-anticipated financial report sent Google shares soaring nearly $80, or 17%, in after-hours trading, putting the stock above $500 a share, about where it was trading six months ago. Google shares have struggled this year, thanks in part to often-discussed comScore data indicating that Internet surfers weren't clicking on Google ads as often as investors were hoping they would. Google had countered that third-party data was not taking into account its own efforts to reduce clutter by delivering fewer, though more relevant, advertising in its search results.[23] While some analysts correctly had warned that ComScore's data was incomplete and perhaps not good measure to use as a proxy for Google's actual results, the numbers nonetheless have good as a nice surprise at a time when sentiment on the stock had turned gloomy. That said, in some ways the numbers weren't quite as good as advertised. UBS' Benjamin Schachter notes this morning that the headline numbers "exaggerate the beat," asserting that gross margins were 150 basis points below his target, and that higher interest income and lower taxes boosted profits by about 30 cents a share, accounting for most of the higher than expected profits. He also rightly notes in a report this morning that "investors will be relieved that the revenue growth story remains intact and that estimates are increasing in the face of a difficult macro environment."[24] Investors' fears were tempered somewhat after some analysts noted that the decline in paid-clicks may have been in part self-inflicted. The analysts, as well as comScore, said that Google had taken measures to improve the usefulness of its ads. They included reducing the clickable area in text ads to avoid accidental clicks. Those improvements might have driven the price of clicks up, leaving investors to guess what effect, if any, the changes had on the company's revenue. Many analysts cut their estimates for Google's growth.[25]

Google watchers have spent the last quarter debating what impact a slowing economy would have on the company. They have pointed to decelerating growth in paid clicksthe company makes money when users click on search adsand predicted first-quarter revenues of $3.6 billion for the company.[26] Askew thinks Google's paid click growth slowed in the first quarter, but not at the same pace as third-party estimates indicate. He also believes growth in revenue per click has offset sluggish paid click growth.[27] Late Tuesday, comScore showed that March clicks grew just 2.7%, resulting in total first-quarter growth of only 2%. Google has been reporting its own paid clicks, but because it uses a different measure than comScore, the results don't match up. They point to a downward trend. In the third quarter -- which is when the company first started including paid clicks in its results -- Google showed a 45% growth worldwide.[10] Following the latest comScore numbers, several analysts on Wednesday admitted that the slowdown in paid clicks could impact Google's earnings for the first quarter, which will be released Thursday afternoon. They mostly stuck by their bullish views on the company.[28] The unease has persisted, as subsequent reports from comScore indicated that the slowing trend in paid clicks continued for the remainder of the first quarter. Google shares are down approximately 40 percent from their November peak.[25]

Excluding some costs, profit topped the average Wall Street estimate by 32 cents a share and beat predictions of all but one of the 26 analysts surveyed by Bloomberg. "They have a very resilient model in any type of economy,'' said Steve Weinstein, an analyst at Pacific Crest Securities in Portland, Oregon, who recommends buying the shares. "They have strong exposure in the U.K., which had a strong first quarter. A lot of other parts of the world are early in their adoption of Internet advertising.'' Google, based in Mountain View, California, had dropped 35 percent on the Nasdaq this year before today, making it the seventh worst performer in the Nasdaq 100 Index. The shares are up more than fivefold from their IPO. In 15 quarters as a public company, the company has exceeded analysts' estimates 12 times.[29] When combined with a 0.3pc fall in January and benign growth in February, the growth rate has slowed considerably. The new research left some analysts questioning whether Google will meets its earnings targets for the current year, with UBS's Ben Schachter saying that Google would have needed to begin charging advertisers more in order to meet estimates. Wall Street analyst-turned-blogger Henry Blodget noted that first-quarter estimates have already been cut significantly since what he refers to as "the first comScore bomb" in January, saying current estimates of 4.16 a share could be met with U.S. growth of 25pc in the first three months of the year. "This 25pc growth estimate obviously assumes that Google has seen a strong increase in price-per-click.[16] First-quarter net income probably rose 27 percent to $1.27 billion, or $3.96 a share, less than half the growth rate of a year earlier, according to the analysts. Sales, excluding revenue passed on to partners, probably jumped 42 percent to $3.59 billion, they estimated. "There is some pretty decent evidence of some softness,'' said New York-based Anmuth, who has cut his target price on the shares twice this year. He cited as one example online jeweler Blue Nile Inc.' s statement in February that fewer people were clicking on its ads.[21]

Google saw a 1.8 percent rise in users clicking on its text advertisements last quarter, slower growth than in the previous period, according to Lehman Brothers. Google depends on the ad clicks, which jumped 25 percent in the fourth quarter, for most of its $16.6 billion in annual sales.[30] Paid click growth "is" slowing, but not as greatly as investors had feared, says Gene Munster, an analyst with Piper Jaffray. Paid click growth fell to 20 percent this quarter, from 30 percent in the fourth quarter and 45 percent in the third quarter. It doesn't matter, Munster says, because Google now earns more per click. "The law of averages make it hard to continue growing like Google once was," he says.[31] Analyst worried that Google's paid click volume would be flat or even drop slightly, but the company announced that paid clicks increased 4 percent fro the fourth quarter 2007, and up 20 percent from the year ago quarter.[32]

Mr. Aiken says large search buyers are spending the same or more, and ad firms that work with large advertisers support that idea. "We don't really have any instances where we're seeing clients pull back their search ads," says Steve Governale, senior vice president and managing director of SMG Search, a unit of Starcom MediaVest, itself a unit of Publicis Groupe. If anything, big advertisers are shifting dollars to search ads because it can be easier to measure the revenue generated by them than it is for ads like glossy magazine spreads, some ad executives say. Some analysts say ad spending is dropping in some industry areas most affected by economic problems, such as financial services. Spending by advertisers in the financial, travel and retail areas declined or grew more slowly in the fourth quarter, compared with a year earlier, Yahoo President Susan Decker told analysts in January, though she said that overall the company had seen "a solid start to the year." It remains unclear how online advertising beyond search is affected by any consumer slowdown. Search advertising is the largest category of U.S. online ad spending, expected to account for 40% this year, according to research firm eMarketer Inc. Other forms of online advertising, such as graphic display ads and video ads, are generally priced using different models than per-user clicks. EMarketer last month reduced its 2008 forecast for U.S. online spending because of concerns about the softening economy.[4] Mr. Rosenberg said Google has seen consumer clicks in some categories traditionally affected by economic softness grow "a little less rapidly" than the overall growth. "But on an absolute basis, they are all showing healthy growth in ad revenue," he added. Areas such as financial services are among those analysts say are probably affected. Google's solid financial performance comes as Yahoo is testing using Google ads alongside a small percentage of its Web search results.[33] The discrepancy may stem from the way ComScore measures the data. The Reston, Virginia-based company only tracks domestic ad clicks and doesn't include results from Google's AdSense service, which places ads on Web sites such as online newspapers and blogs. Google gets almost all of its revenue from four-line text ads that mainly run alongside its search results.[29]

Troy Henikoff, an Evanston -based Internet entrepreneur and Northwestern University professor, said online advertising has "a more favorable outlook than traditional channels" because it is so measurable. He said Google continues to improve at displaying the search results users want to see, even for paid results. "If I'm willing to pay a $1 per click on a keyword, but someone else pays $2 for a click, my ad may still rank higher because it is getting clicked on three times more often," he explained. "Google maximizes revenue that way and a side effect is that those ads are more attractive to consumers."[11] Not so. Google's paid search clicks actually rose by 20%, and consequently its shares rose 17% in after-hours trading, according to the Wall Street Journal. comScore wasn't so lucky - its own shares fell by 8.4% after the Google results. Chief executive Magid Abraham said: "People automatically assumed Google's revenue is going to be missing their target.[34] In 4 p.m. trading on the Nasdaq Stock Market Wednesday, Google shares rose 1.8%, or $8.19, to $455.03. They are down about 34% since the start of the year. Mr. Aiken says his analysis of search-ad activity and conversations with search-ad buyers indicate that small- and medium-sized search advertisers are pulling back. Such a development would probably drag on Google's search-ad revenue, because about 99% of its more than one million advertisers and the majority of its revenue come from that category, according to people familiar with the matter.[4]

Earnings per share came in at $4.84--beating analysts' expectations that averaged in the $4.50 range. Part of Schmidt's optimism in the face of what he called "macroeconomic factors" in the U.S. stemmed from the fact that a slight majority of Google's revenues (51%) came from outside of the United States--the first time since the search giant began operating internationally.[13] ANALYST TAKE: In a recent investor note, Stifel Nicolaus & Co. analyst George Askew kept "conservative" expectations for Google, saying he expects first-quarter adjusted earnings of $4.34 per share on revenue, excluding traffic acquisition costs of $3.42 billion.[27] Analysts expect revenue of $3.61 billion excluding customer acquisition costs and earnings before items of $4.52 a share. For investors, perhaps it's largely been the of a broad recession that's keeping some of them at bay. It's harder to ignore the possibility that the economy is having a true impact on Google, through a combination of advertisers pulling back on spending and users clicking less frequently on ad-supported links.[10]

On average, Wall Street analysts were expecting Google to report revenue, excluding commissions to advertising partners, of $3.61 billion and income, excluding the cost of stock options, of $4.52 a share.[25] Excluding commissions paid to advertising partners, a widely followed measure, Google's revenue was $3.7 billion, slightly higher than analysts expected. Its profit, excluding the cost of stock options, was $4.84 a share, handily beating forecasts.[25]

So. HOW DO YOU RESTORE CONFIDENCE? - If Google shares are "cheap" and analysts are correct in their $650 price target over the next twelve months (see factoids below), what will it take to get people back into the stock? Watch the post-earnings analysis for statements of restored confidence in Google or. another round of capitulation if the results disappoint. TIC TAC DOUGH - This is one of the traps one has to avoid while reading earnings: exclude Traffic Acquisition Costs (TAC) from Google's gross revenues figure. TAC is the money Google pays others to drive people to its website.[35]

Google, whose shares plunged 36 percent in the first quarter, may report profit below analysts estimates for a second straight period today, said Dan Chung, chief executive officer of Fred Alger Management Inc. "The quarter is going to be a close call and that in itself might be somewhat negative for the stock, given that Google has had a terrific multiyear run since its IPO,'' Chung said in an interview in New York with Bloomberg Radio.[21] Excluding one-off items and expenses related to share options, the strong first quarter numbers meant Google delivered earnings per share of $4.84, some 7pc higher than analyst's consensus forecasts of $4.52.[17]

The search vendor posts a 31 percent profit on sales of $5.19 billion, beating analysts' estimates. Google swatted aside concerns about weakness in paid clicks by reporting a 31 percent profit for its first-quarter 2008 earnings April 17.[1] OVERVIEW: In February, analysts and investors reacted with concern after data from comScore Inc. indicated Google's January domestic Web search paid clicks were basically flat year over year but down sequentially.[27] Google posted 20% year over year paid click growth, far better than the 2% or so indicated in ComScore's (SCOR) measurement of domestic clicks on Google's search ads.[24] As was discussed ad infinitum in Q1, here and elsewhere, Comscore reported that Google paid clicks in the U.S. in Q1 grew only 2% a year. According to Comscore, this was a major slowdown from Q4, in which Google reported U.S. paid click growth of 25%.[36] Last night, Google reported global paid click of 20%, which was a sharp deceleration from 30% in Q1. How does this square with Comscore's U.S. data showing a 2% rise? The majority of Google's click growth in the quarter likely came in the international business.[36]

The January and February comScore data follows Google's fourth-quarter report that indicated paid clicks rose 30 percent year over year in that period _ a sharp decline from previous quarters.[27] Aggregate paid clicks on Google and its partner sites grew by 20 percent over the year ago period and 4 percent since last quarter.[37]

For the month of January, paid clicks fell 0.3 percent, which is a sharp drop from the 25 percent to 40 percent growth rates for paid clicks that Google posted in previous years.[38] "Google's stated strategy of improving the relevance of ads for users and return on investment for advertisers is driving slower paid clicks growth, we believe," said Askew, who rates the stock "Buy" with a $610 price target.[27]

"Our ongoing innovation in search, ads, and apps helped drive healthy growth globally across our product lines, yielding another strong quarter for Google," said Eric E. Schmidt, chief executive of Google, in a news release. Analysts have become obsessed with Google's "paid clicks," or the number of times users clicked on its ads.[25] 'Our ongoing innovation in search, ads, and apps helped drive healthy growth globally across our product lines, yielding another strong quarter for Google,' said Eric Schmidt, CEO of Google. Google currently employs 19,156 full-time employees, an increase of 2,351 employees since this time last year.[9]

"Our ongoing innovation in search, ads, and apps (online applications) helped drive healthy growth globally across our product lines, yielding another strong quarter for Google," said Google Chief Executive Eric Schmidt in a statement.[6]

Google's growth rate is slowing. Its ex-TAC revenue in the year-earlier quarter rose 65.8% from first-quarter 2006. Google also continues to sign up partner sites, such as MySpace, where it can place its search ads. Those deals don't come cheap, Squali says. "It's becoming more competitive to land these publishers," he said.[2] "This is the quarter where we're now 51 percent international, and I don't think that number is going to go down,'' Chief Executive Officer Eric Schmidt said on a conference call. Google is seeing "market share growth and good revenue growth in China,'' he said.[39] "I don't think that number is going to go down,'' Chief Executive Officer Eric Schmidt said on a conference call. He credited some of that overseas expansion to market share growth and sales gains in China. Technology companies such as Intel Corp. and International Business Machines Corp. also reported results that topped analysts' estimates this week, following a quarter when the Nasdaq Composite Index tumbled 14 percent.[29]

Google spokesman Jon Murchinson said the company wouldn't discuss earnings until it reports results after the close of New York trading. CEO Eric Schmidt said in March the company may weather slowing economic growth in the U.S. because of its operations abroad, where Google gets about half its sales.[21] Revenue growth in the U.S. market was 30 percent, while total revenue growth was 42 percent without deducting traffic acquisition costs. All eyes were on the company's click growth ahead of its earnings release today, and Google didn't disappoint.[37] ComScore reported click growth was flat or down during the first three months of the year, leading some to speculate consumer economic nervousness led to fewer shopping-related searches and harm to the company's revenue growth. Google didn't break out click growth trends on its own sites versus its network.[37] SAN FRANCISCO - Google said Thursday that its net income for the first three months of the year rose 31 percent on revenue growth of 42 percent from a year ago, topping estimates from Wall Street analysts.[25] Google's first-quarter earnings report, scheduled for Thursday afternoon, just got a lot more interesting. Late Tuesday night, those Internet traffic trackers at ComScore put out some lousy news: growth in paid-search clicks in the United States is slowing down. In fairness to Google, it did better than its competitors, according to a JPMorgan report issued Wednesday morning. (ComScore's paid-click numbers are not typically issued directly to public. We hear about them when Wall Street analysts issue their own reports on the data.)[40] Analysts had relied on data from industry research firm ComScore Inc., which showed little growth in the number of clicks on Web advertisements -- so-called paid clicks. That led Wall Street to predict a slump in online advertising.[29]

Schmidt also scoffed at recent industry apprehension about comScore's reports of paid-click growth deceleration. "Paid-click growth is much higher than has been speculated by third parties," he said, referencing the 20% growth year-over-year in paid clicks, both on Google and AdSense partner sites.[13] Coop ran off and did a post on Schmidt’s dirty deed since it was very clear that Google was talking about Comscore's paid click data. What does this really mean? In the grand scheme of things, Schmidt delivered a brush back pitch to Comscore and could have opened the door for any company to publicly question the Internet measuring service's numbers. Let's be clear: It's one thing if a peon like me questions Comscore's data and model. It's quite another when Schmidt raises the issue.[8] The results from research firm comScore haven't helped. In January, they showed that the company's U.S. paid clicks slipping slightly. That spurred another selloff in Google's shares.[10] SUZANNE PRATT: Shares of Google surged 18 percent in after-hours trading after the company announces earnings that click with Wall Street. Its 30 percent jump in first-quarter profit shows online advertising continues to grow despite a slow U.S. economy.[41] Google has stuck it to the naysayers by reporting higher-than-expected earnings - even as the weakening U.S. economy and research showing a slowdown in ad clicks raised doubts about the search king's continued prospects. Shares, which have declined about 35 per cent this year, rose 17 per cent following the report.[42] Mark Mahaney of Citigroup also said the paid-click slowdown "could imply a risk to estimates," but said other metrics are not yet bearing that out. "The disconnect is that this type of step-function deceleration should show up as a material fall-off in leads to Search Engine Marketers and channel checks remain generally positive," Mahaney wrote in a report. Rob Sanderson of American Technology Research noted that sentiment has largely turned negative around the stock, while at least 16 brokers have trimmed back their earnings targets for Google over the past two months. "With the parade of estimate revisions and correction in the stock, expectations are considerably lower going into the report on Thursday," Sanderson wrote in a note, in which he maintained a buy rating and $750 price target on the shares.[28] Shares of Google dipped in morning trading despite an upswing across the tech sector that was fueled by strong results at chipmaker Intel Corp. However, the stock turned up by midday, and was last up 1.8% to $454.66. The once high-flying stock has shed about 20% of its value since the company's fourth-quarter earnings report on Jan. 31.[28]

Over the last two months, stock analysts cut Google earnings estimates to an average of $4.52 per share from a much richer $4.84 in January, according to Thomson Financial. Expect Google speculation to loom large at ad:tech, an online-advertising industry conference taking place this week in San Francisco.[38]

Google's paid-click numbers are cause for grim speculation ahead of the company's first-quarter earnings announcement. Google's search share increased a half percent in March compared with February, but that's not what has financial analysts flapping their gums a day before the search giant announces first-quarter earnings.[5]

Google's shares surged 17% Friday morning to $527.78 after the company reported first-quarter profit rose 30% from the year before, compared with 17% profit growth in the 2007 fourth quarter.[43] Google's first-quarter report comes amid intense interest and speculation over the impact that a slowing economy may have on the Internet search giant and on the online advertising business overall. When Google reported financial results for the fourth quarter of 2007, Mr. Schmidt, told investors that the company had seen no adverse effects on its business from a slowing economy. Google gives no guidance to investors on its expected future performance.[25] "The boys came through," Mr. Gillis said yesterday. "This is going to de-emphasize the attention paid on third-party paid-click data." Google launched more than 100 improvements to its search engine business in the quarter. Although Mr. Schmidt said Google was "excited" to be testing out its new search advertising partnership with rival Yahoo Inc. - currently the subject of a hostile takeover bid from software giant Microsoft Corp. - he would not comment further on the relationship between the two companies. "It's nice working with Yahoo and we like them very much," Mr. Schmidt said yesterday.[44]

On average, advertisers are paying more for each click. Mr. Schmidt acknowledged in an interview that, in some unspecified areas, those prices are near the maximum levels advertisers may be willing to pay, given their other advertising options. "There are some 'verticals' where we might be hitting limits, and there are plenty of verticals where we're not -- but in aggregate there's still plenty of room for growth," he said. He also specified that there were hundreds of thousands of vertical advertising categories in Google's systems, factoring in such things as types of advertisers and regions. The price of search advertisements is determined by an auction-based system where advertisers bid against each other to have their ads displayed more prominently.[33] Google co-founder Sergey Brin expressed optimism about Google's future in light of growth in mobile search and mobile advertising. He did not offer specific figures to quantify his expectations of the mobile market. Schmidt declined to go into detail about Yahoo's experiment with using Google to serve its ads beyond saying that the test is in its second week. "It's nice to be working with Yahoo," he said. "We like them very much."[19]

Meanwhile Efficient Frontier found travel-related ad spending exhibited strong growth while financial advertising shrank. Google's Schmidt said the company had not observed any negative impact on its business based on macro-economic conditions. "We've looked at this really carefully, and we do not see an impact as of this time," he said.[37] The report comes amid fears that an economic slowdown or recession could be hurting Google's paid-click results, the number of text ads that Web searchers click on. Schmidt essentially called those fears baseless. "It's clear to us that we're well positioned for 2008 and beyond, regardless of the business environment that we find ourselves surrounded by," Schmidt said on a conference call. "We've looked at this really carefully, and we do not see an impact as of this time."[6]

Data released in late February by Internet tracking firms seemed to indicate that Google's core "paid-click" advertising business was flagging. Google makes money from these ads only when a user clicks on one, and the number of those clicks appeared to be slipping. While some analysts at the time argued that Google was improving its technology to prevent click fraud and reduce lower-quality clicks - thereby providing a stronger return on investment for advertisers, raising the price Google can charge for those ads - many analysts responded by slashing their price targets and lowering expectations.[44] Data from research firm comScore Inc. showing a drop in the number of times people click on the ads have fueled the jitters, which have already knocked almost $75 billion off Google's market value since the beginning of the year.[4] One part of Google's problem is that paid clicks, or the number of times people click on sponsored ads, have stalled, according to comScore.[38]

Simmering concerns that a slowdown would indeed affect Google, perhaps to a significant degree, boiled over in late February when comScore, the Web audience measuring firm, issued a report indicating a slight decline in paid clicks in January when compared with January 2007. Such clicks are important because Google charges an advertiser only when someone clicks on their ad.[25] Where are all of Google's paid clicks going? No one knows for sure, but ComScore and Citi Investment Research's Mark Mahaney speculated that the company's attempts to improve lead quality for advertisers and the user experience for searches contributed to the decline.[5]

ComScore's paid click data proved to be a very poor indicator of Google's paid search revenues, and improved pricing helped."[24] As a percentage of total search, paid clicks typically make up between 9 percent to 12 percent of the total for Google, according to ComScore.[11] That was a clear reference to a ComScore Inc. report Tuesday that showed Google's paid clicks grew by only 2.7 percent in March compared to the same month in 2007.[20] Late Tuesday, comScore Inc. issued a report showing that paid clicks at Google (GOOG) grew 3% in March compared with the same period last year.[28]

The overall paid-click gains in the quarter were significantly greater than research firm comScore Inc.' s Tuesday estimate of 1.8% growth in U.S. clicks -- excluding some nonsearch Google partners -- from a year earlier.[33] As analyst Rob Sanderson noted for American Technology Research, there is "acceleration in revenue per click." Google "results have demonstrated this relationship every quarter since they've provided paid-click growth," he wrote in a Wednesday report.[11] Google said profits rose 31 percent in the first quarter on 42 percent revenue growth.[31] Growth for the full quarter was just 1.8 percent year over year, a rapid drop from 25 percent year-over-year growth in the fourth quarter. ( Henry Blodget at Silicon Alley Insider has a good take on the worst-case scenario for Google's first quarter.)[40] Google reported that clicks on the ads it shows increased 20% in the first quarter from a year earlier, compared with 30% in the fourth quarter.[33] As of 5 p.m. EDT, Google shares were up more than 17%. Google reported a decline, albeit a slight one, in its traffic acquisition cost (TAC) as a percentage of ad revenue, which came to 29.2% in the first quarter, compared with 30.3% in the fourth quarter of 2007. Since 2005, its TAC as a percentage of ad revenue has been trending downward, with the exception of the fourth quarter of 2007.[19]

Following the news, shares rose 17% in after-hours trading to $526.62, adding almost $25 billion to the company's valuation. Google executives highlighted their efforts to sell advertisements beyond the small text ads that are currently the company's core revenue driver.[33] Google said total revenue rose 42% to $5.19 billion. Revenue minus traffic acquisition costs -- commissions the company pays to other sites that carry its ads -- rose 46% to $3.70 billion.[2] Excluding $1.49 billion in partner commissions called traffic acquisition costs, Google's revenue was $3.7 billion. That result was 46 percent greater than the year-earlier amount and about $100 million more than the $3.6 billion analysts expected.[6] Revenue grew 42% to $5.2 billion, with 51% coming from international markets, the first time the majority of Google's sales came from outside of the U.S. Revenue minus traffic-acquisition costs was $3.7 billion, better than the $3.6 billion analysts expected.[23] Revenue minus traffic acquisition costs came in at $3.7bn, again higher than the analysts' consensus which had forecast $3.61bn. Google also attempted to minimise concerns over its reliance on the U.S. market, by pointing out that 51pc of its revenue now comes from non-US consumers. Colin Gillis, technology analyst with Canaccord Adams, said it was a good day to be a supporter of the company: "It's a good time to be a Google bull.[17]

Responding to an analyst's question, Schmidt reiterated a previous statement to the effect that the U.S. economic downturn has no significant impact on the company's business. "On the macro side, we've looked at this really carefully and we do not see an impact as of this time," he said, adding that Google is well positioned should the economic situation deteriorate because its ad model is so targeted.[19] The Calabasas, California-based company agreed to be acquired by Bank of America Corp. in January after mortgage-related losses caused the stock to slump 85 percent in 12 months. Consumer sentiment in the U.S. fell to its lowest level since 1982 this month, according to a preliminary report from Reuters and the University of Michigan, as employers cut hundreds of thousands of jobs and oil prices climbed to a record. Google's Schmidt said today that the company remains well positioned because its systems can target ads at specific consumers.[39] Consumer ads may be the next to falter. RBC Capital Markets analyst Ross Sandler in New York reduced his 2008 and 2009 profit estimates for Google last month on concern that Americans' spending will slow. Consumer sentiment in the U.S. fell to its lowest level since 1982 this month, according to a preliminary report from Reuters and the University of Michigan, as employers cut hundreds of thousands of jobs and oil prices climbed to a record. Best Buy Co., the largest U.S. electronics retailer, said this month it will cut some mass-market promotions and instead target customers who join its member rewards program.[21]

"Financial advertising has slowed,'' said Marianne Wolk, an analyst at New York-based Susquehanna Financial Group, who recommends buying Google shares. Washington Mutual Inc., the biggest U.S. savings and loan, said this week it cut ad spending 16 percent in the past six months.[21]

"People said, `Google can't keep defying the laws of gravity,' but it looks like Google is flying high again.'' Google, down 35 percent this year amid concern that slower spending by U.S. financial and consumer companies would stifle growth, climbed $79.21 to $528.75 in extended trading after closing at $449.54 on the Nasdaq Stock Market.[39] Google, owner of the most popular Internet search engine, advanced $77.96 to $527.50 at 9:48 a.m. New York time in Nasdaq Stock Market trading.[29]

Regardless of Google's first-quarter numbers, Mahaney isn't panicking. He reaffirmed in an April 9 note that Google remains one of the best plays off the secular growth in Internet advertising. He said Google's innovation potential is creating option value in terms of the company's potential to benefit from new Internet revenue opportunities, specifically in display advertising, video advertising and mobile search.[5] Is the paid-search advertising business as immune to a sour community as Google executives like to believe? We'll find out tomorrow. Google, of course, is one of those big tech companies people closely follow in order to get a read on the health of the high-tech industry. We watch Google's results more closely than any other Internet company for good reason: because of its dominant search market share, Google is a good indicator of the health of Internet advertising.[40] Piper Jaffray analyst Gene Munster says Google's results proves the company continues to dominate the online search business. They continue to gain share on the Internet, and we are seeing that in the results.[41]

The Mountain View, Calif., company gets paid when users click on sponsored ads that come up along with results of a Google search.[27] Google only gets paid when a Web user clicks on one of the countless little ads that show up near Internet search results.[31]

Prominent market-tracking firm ComScore has put out reports saying that growth in click-throughs on Google's trademark Internet search ads is declining, spooking investors.[31] When Google Inc. reports first-quarter earnings after the market close Thursday, investors will find out whether their worries about the impact of the softening economy on Google search ads are justified.[4]

In a conference call for investors, Schmidt said that Google's search, ads, and apps strategy has had a transformative effect on the company's business.[19] Just three months ago, Wall Street analysts were panicking as the Internet darling appeared to be losing steam, and investors punished the stock, erasing most of the meteoric gains Google had posted in 2007. "It's clear we are well positioned for 2008 and beyond, regardless of the business environment we find ourselves surrounded by," chief executive officer Eric Schmidt said during an afternoon conference call.[44] SAN FRANCISCO -- Google's GOOG earnings miss last quarter raised suspicions that the Internet behemoth had finally been stung by the macro-economy. While the company's first-quarter earnings report on Thursday may be the ultimate decider, it's looking increasingly as if those fears were justified. In February, Google's stock plummeted nearly 9% the day after its fourth-quarter earnings fell short of Wall Street's expectations.[10] Google today posted its first quarter profits, thoroughly outpacing Wall Street analyst estimates, which were based on the effects a slowing economy would have on sales and earnings.[32] Google's first quarter results are amazingly good, given the worries on Wall Street about a slowdown in consumers clicking on its ads. (Google largely earns money only when people click on ads.)[45]

For the first quarter, Google reported net income of $1.31 billion, or $4.12 a share, compared with $1 billion, or $3.18 a share, a year earlier.[20] For the three months ended March 31, Google had a profit of $1.31 billion ($4.12 a share), compared with $1 billion ($3.18) in the first quarter of 2007.[7]

Exceeding investor expectation, Google on Thursday reported revenue of $5.19 billion for the first quarter of 2008, 42% more than it reported in the first quarter of 2007.[19] Google nailed its first quarter, reporting net income of $1.31 billion on $5.19 billion in revenue.[37]

In the quarter, Google reported international revenue of $2.65 billion, or 51% of total revenue, the first time non-U.S. revenue has been more than half.[2]

Google tallied $5.19 billion in revenues, an increase of 42 percent from the $3.66 million it notched in the same quarter a year ago.[1] Google reminded everyone how little we know about the way the Internet works. It announced revenues of $5.19 billion for the period, up 42% from the same quarter last year.[26]

During the quarter, Google reacted to Microsoft Corp.' s bid to buy ailing Internet icon Yahoo Inc. for more than $40 billion, which was announced in February. In a posting on the company's official blog, Google's chief legal officer David Drummond said it "raises troubling questions," such as whether Microsoft could use such an acquisition to "attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC."[27] Trying to catch up with Google, Microsoft Corp. has bid $44.6 billion for Yahoo! Inc., a transaction that would combine the second- and third-biggest U.S. search engines.[29]

Google has posted a 31 per cent surge in quarterly net income and said it is well positioned for growth even if the economy weakens further. The search engine giant saw its net income climb from $1 billion (''500.9 million) in the three months ended 31 March. To access this article and the rest of the news and content on mad.co.uk. you need to be a subscriber.[46] Goggle.com performed very well, up 49% year over year to $3.4 billion, driven by strong traffic growth and to a lesser extent, monetization growth. AdSense revenue grew 25% over Q1 2007, reflecting solid performance across both the Content and Search networks.[47]

I think if you think about what economists would typically theorize in a macroeconomic climate that was slowing they look at sectors like some of the ones you'''ve mentioned ''' automotive, luxury goods, we also track travel and finance -- and you look for the ones that are more sensitive to macro-economic conditions, and look to see what'''s going on with them. What we tend to see is that clicks in some of those sensitive areas do grow a little less rapidly than our overall growth so the share of their total queries is actually down but on an absolute basis, they are all showing healthy growth in ad revenue. In the UK, for example, people are clicking on travel and local ads at a higher rate than they do in the U.S. In finance, although certain components of finance are down, foreclosures are up and even more mortgages do pretty well, if you think about foreclosures, every foreclosure at some point becomes a home sale and a mortgage to somebody. Generally what we are seeing is absolute growth even in those areas that are otherwise adversely impacted by macroeconomic conditions.[47] Analysts had used industry data that showed slowing growth in the number of clicks on Web advertisements to predict a slump in revenue in the U.S. Instead, the growth in clicks "remains healthy,'' finance chief George Reyes said, and international sales jumped 55 percent. "I was expecting them to fall short,'' said Jerome Dodson, a portfolio manager at Parnassus Investments in San Francisco.[39]

Yahoo paid clicks declined 3.1 percent year over year in March (all percentages are year-over-year comparisons), though for the quarter, paid clicks at Yahoo grew 5.4 percent, also marking a drop-off from the fourth quarter's 9.8 percent growth.[40] For the first quarter in 2008, paid clicks grew only 1.8 percent, down from 25 percent in the fourth quarter and the 48 percent growth in the third quarter.[11]

Google's employee growth rate in the first quarter climbed to 14%, compared with 6% in the fourth quarter.[33] Google said so-called "paid clicks" grew 20 percent in the first quarter over the same year-ago quarter, and 4 percent over 2007's fourth quarter.[31] International operations generated 51% of Google's revenue in the first quarter, compared with 48% in the fourth quarter.[33] Google also reached a notable milestone, as 51 percent of the search giant's revenue in the quarter came from international markets. That's up from 47 percent in the year-ago quarter and 49 percent from the fourth quarter of 2007.[20] The U.K. accounted for 15 percent of Google revenue in the period, up from 14 percent in the fourth quarter.[29]

"We're well-positioned for 2008 and beyond, regardless of the business environment we find ourselves in." Google disappointed investors after its fourth quarter, when it reported results that didn't match Wall Street's expectations.[31] Greg Sterling, an analyst with Sterling Market Intelligence, says Google's results shows that investors' fears "were somewhat unfounded. Google's growth was not as spectacular as it would have been in a spectacular economy, but it's still the biggest quarter they've ever had."[31] Duncan Parry, Director of Strategy for Steak Media, said that Google's continued growth showed how digital advertising continues to prosper and offer efficiencies that attract advertisers and increased spend despite worries about the economy. He added, "Of particular interest is the growth in mobile searches; this is an area we feel is finally taking off for consumers and will continue to grow throughout 2008 and into 2009. "We expect the integration of Doubleclick to lead to new tracking and targeting innovations this quarter and the next; it will also be interesting to see if a free "lite" version of Doubleclick's platform emerges in a similar vein to Google Analytics."[48] Douglas Anmuth, an analyst at Lehman Brothers Holdings Inc. in New York, had expected a drop in finance-related searches last quarter to curb sales growth at Google.[29]

Wall Street analysts and Google management have all sorts of ideas about why Google is recession-proof. CEO Eric Schmidt says the company will be saved by international growth and/or the diversity of its advertiser base.[38] "Paid click growth is much higher than has been speculated by third parties," Eric Schmidt, Google's chief executive said on the conference call with analysts.[45] "Paid click growth is much higher than has been speculated by third parties," said Google CEO Eric Schmidt. "In search, we continue to invest in quality both here and internationally.[37]

When paid click count stops growing, google's growth opportunity will rest solely on the amount it can extract from each click.[26]

Google announced that paid clicks for the company grew 20 per cent in the quarter over the same period last year, and were up 4 per cent over the December quarter.[44] Paid clicks refer to the number of times Google users click on an ad-sponsored link, which is the company's main driver of revenue.[28] Paid clicks will be a focus for Google's first-quarter report on Thursday, as analysts look for signs on how the slowing economy might affect the company's business.[28] Google is starting to make that distinction: While the total number of paid ad clicks may not be growing as fast as it once did, Google says the ads that are getting clicked on are more profitable. While business technology may not show up on Google's balance sheet, at least it's on the company's mind.[26]

The discrepancy may stem from the way ComScore measures the data. The company only tracks domestic ad clicks and doesn't include results from Google's AdSense service, which places ads on Web sites such as online newspapers and blogs.[39] ComScore spurred concern that the number of people clicking on Google's text ads -- the four lines of ad copy that run next to search results -- had stalled last quarter.[39] Last quarter Google shares got hammered on reports that fewer people were clicking on ads. It took a while for people to figure out that Google had changed/improved the way it counted click-throughs. MARKET SHARE - ComScore's latest monthly tally of websearches showed Google grew its market share to 55%.[35] In recent months, market researcher comScore issued multiple reports showing the number of people clicking on Google ads didn't grow as quickly as it has in the past. That, combined with a slackening U.S. economy, caused some people to think that Google's streak was over.[42]

Until Google whips out some data showing that U.S. paid clicks were up, say, 25%, in Q1, I'm going to continue to think that the Comscore U.S. paid click data were directionally accurate.[36] Directionally correct? Directionally correct? An undergraduate economist emerging from decade-long stasis an hour before the Google earnings call could have told you that a slowing U.S. economy would cause some slowing in paid clicks.[49]

Aggregate paid clicks include clicks related to ads served on Google properties, as well as ads served on our partner sites.[47] Henikoff said companies are getting better at what's called search engine optimization, which could be another reason the number of Google's paid clicks are decreasing.[11] ComScore said paid clicks and search market share for Yahoo, Microsoft and AOL also fell in March, a sign that people may be searching less for items to buy in a weakening economy. ComScore debunks this theory by virtue of its total search numbers.[5] I spend hours each day searching google for facts but never click on paid advertising links. I wonder if there is any possibility of suing comscore for the damage done to the Google share price by their faulty research.[17] What remains to be seen, of course, is whether the ComScore results have any correlation to Google's financial results. Similarly disappointing news earlier this year led to a significant drop in Google's share price.[40] Sales a year earlier jumped 66 percent. Google extended its lead in the U.S. Internet-search market last month, with its share of queries rising to 59.8 percent from 59.2 percent in February, ComScore said in a separate report.[30] The report shows Google's income rising 30 percent to $1.31 billion ' $4.12 a share ' with $1.54 billion before one-time charges.[32] Google's shares closed Thursday at $449.54, off 35 percent since the end of 2007. Tribune news services contributed to this report.[20]

The news saw Google's shares, which had slumped from highs of $747.24 in October, rise by more than 12pc to $503.78 in extended after-hours trading, passing the $500-mark for the first time since in two months.[17] After the close of trading, Google posted earnings of $4.84 a share, well above analyst forecasts.[41]

WHERE'S THE GROWTH? - Most companies would kill to have growth numbers like Google's. There are lots of well-reasoned arguments for why Google shares should be higher, but many of them were there a couple months ago when the stock was $100, $200 or even $300 higher.[35] Excluding expenses for employee stock options, Google would have earned $4.84 a share, 32 cents higher than analysts had expected.[42]

Google Rides High On Strong First-Quarter Revenues Apr 18, 7:00 AM Google's stock soared by nearly $80--more than 17%-- in after-hours trading after the search giant delivered. CBS Interactive Overhauls Management, Plans For Acquisitions Apr 18, 7:00 AM Under pressure to offset losses at its parent company, CBS Interactive on Thursday announced a broad.[13] Does that mean that Google's prime source of revenue is slowing? Or that a weak economy is starting to wear on the search giant? "The cause is most likely due to the quality initiatives instituted by Google, rather than slowing economic trends impacting online advertising," wrote Robert Peck in a Bear Stearns research report. "However, we have not ruled out the latter." Google has said publicly on several occasions this year that it is cleaning up its search results to remove non-relevant links. That includes removing expired links and those from Web sites that try to lure visitors by inserting random and popular keywords that are irrelevant to what the site actually offers.[11] We see it in the revenue per search continues to go up. Advertisers are willing to increase their bids for those search results, and so Google as a platform is becoming essentially the building blocks of the Internet, and the results tonight reflect that.[41]

In ads we did a bunch of things in the last quarter. One of the main areas was AdSense where we made improvements for both publishers and advertisers. We launched Google Ad Manager for Publishers, which helps publishers make their entire inventory available on the AdSense network. In testing, publishers greatly increased their revenue with this, so we are really excited about it.[47] The subprime mortgage meltdown that spurred the near- collapse of lender Countrywide Financial Corp. and investment bank Bear Stearns Cos. curbed Google's ad revenue growth in the past few months, Lehman Brothers Holdings Inc. analyst Douglas Anmuth said.[21] Schmidt also expressed optimism about Google's business in China. "We are seeing market share growth and revenue growth as we learn to operate in that environment," he said.[19] Most impressively, Google is showing cost controls while maintaining growth, with margins stable for three quarters in a row at 58% However, over the intermediate-term (next 2 quarters) we still believe that Google could face some economic headwinds in the U.S. and UK, which could create more volatility in shares[22]

Comscore had tipped paid-click growth declining to 2%, which would have smoked Google's results on the quarter, but didn't happen.[49] Google's solid performance came despite slowing growth in the number of times consumers clicked on ads that appear alongside Google's Web-search results and on partner sites.[43] Google's net climbed 30% despite slowing growth in the number of clicks on ads.[33] In China the number of ads viewed on laptops and PDAs is modest but the proliferation of laptops and PDAs is huge. This bodes well for enormous Google growth in China for many years to come.[26]

For the past three months, ComScore data show that while the number of Google's paid searches has grown modestly, the growth rate has decelerated significantly.[11] The next month, concern was again sparked when analysts, citing comScore data, said Google's click-through rate grew 3 percent in February year over year.[27] "The comScore data have caused a lot of angst and anxiety for investors that look largely unfounded," said Jeffrey Lindsay, Internet analyst with Sanford C. Bernstein, whose firm makes a market in Google shares. ComScore declined to comment, but its Chief Executive Magid Abraham said in an interview Wednesday that some investors had jumped to conclusions that comScore's data don't support.[33] "Investors are not used to the idea of Google missing numbers.'' Excluding some costs, profit probably rose to $4.46 a share, Lehman's Anmuth said, making him more pessimistic than analysts on average. They project $4.52, according to a Bloomberg survey of 25 analysts.[21] Investors drove shares of Google back past $500 in after-hours trading, restoring some of the momentum the company had lost in recent months.[44]

Investors were thrilled with Google's results, pushing Google's stock up 17 percent in after-hours trading to $525.96.[31] In an orgy of recession hysteria, investors sold Google shares in a panic, sending the stock down 10 percent over two days in February.[38] STOCK PERFORMANCE: Google shares sank a bit more than 36 percent during the quarter.[27]

Google topped pessimistic Wall Street profit expectations Thursday, reporting a net income increase of 31 percent to $1.31 billion for its most recent quarter.[6] Wall Street seemed to echo that view, as Google shares rose $8.19, or 1.83 percent, to close at $455.03.[11] Google shares rose $8.19 to $455.03 Wednesday. The shares have tumbled 34 percent this year.[30] BUT THERE'S STILL FAITH - Analysts' price targets have also been falling, but the consensus is still looking for Google shares to top $650 in the next year. That would require a jump of more than 40% from current levels.[35] Google's first-quarter net income soared 31% to $1.3 billion, or $4.12 per diluted share, from $1.0 billion, or $3.18 cents a share, in the prior year.[12]

The search giant has reported that its first-quarter profits were up 30% on the same time last year, at $1.31 billion. For the period ending March 31, Google reported a rise in sales of 42% to $5.19 billion, easing any worries they'd been hit by the economic slowdown.[50]

April 17 (Bloomberg) -- Google Inc., owner of the most popular search engine, reported a 30 percent increase in first- quarter profit after international expansion countered a slowdown in U.S. advertising spending.[39] Yahoo!'s search advertising business grew faster in the first quarter than Google or Microsoft.[10] According to a Wednesday report from Nielsen Online, overall traffic to Google grew 12 percent in the first quarter of 2008 compared with last year.[11] NEW YORK -- Google Inc. reports earnings for the first quarter after the market closes on Thursday.[27] Google's first quarter earnings call didn't have much in the way of theatrics, but a serious brush back pitch was delivered to Comscore.[8]

I lean to the first bullet: Blame Comscore. As some are pointing out, and as Comscore's aftermarket weakness is showing, this is turning into an acid test for Comscore -- and it's failing. This morning on CNBC we were arguing about the blame to be accorded web traffic service Comscore in investors collectively leaning the wrong way on Google's earnings last night.[49]

Why not ask the company that has become almost synonymous with online advertising? Unlike most public companies, Google never gives any hints in the form of earnings guidance. In recent months, as uncertainty and expectations alike piled up, investors have turned to other metrics--and they haven't liked what they've seen.[14]

Google investors breathed a sigh of relief Thursday after the company defied skeptics by reporting healthy first-quarter results and proving that a weak U.S. economy is no match for the world's most powerful online search company.[23]

Google engineers pride themselves on the software that delivers the most relevant ads -- and therefore, the most profitable ones -- for each query. Google co-founder Sergey Brin said the company made 100 improvements in its search routines during the quarter.[7] The company said it added 2,351 employees in the quarter. Google's operations generated cash of $1.78 billion last quarter, bringing its total cash, equivalents and marketable securities to $12.1 billion.[39] The company, which said two quarters ago that it would start watching employee headcount, said it now employs 19,156 full-time employees, up from 16,805 full-time employees at the end of 2007. Schmidt also noted that Google has not settled on a new chief financial officer to replace the outgoing CFO George Reyes, though the company has met with a number of "interesting candidates," he said.[1]

In the Apps case, we are working to build out a whole new online web experience and we'''re beginning to have all of the pieces now in place. The recently announced Salesforce.com partnership allows us to integrate for an enterprise customer with the Salesforce.com products as well as all of the Google application services and sold through their direct sales operation. By doing these partnerships and by investing heavily in new applications models we think people will spend more and more time online and they will able to do things like sharing documents, sharing calendars, dealing with photos and all those kinds of things in a way that had not been possible before. This has all been possible because of the many, many talented Googlers and the executive leadership that we'''ve seen in the last quarter and I want to thank everybody for that.[47] The gadget and the rich media creative which are served by third parties are pretty much all being adopted by folks. I think that the biggest thing that we are seeing that Omid alluded to in terms of the examples is the concept of an advertiser owning a concept across the entire web and finding their whole audience. Another example is Activision. I think they use seven Google products to support the launch of the Tony Hawks Proving Ground Game and Search, AFC, the YouTube homepage and I think the in-video format is working particularly well. The one thing I would also add there is they are creating traction on mobile ads.[47]

In summary, we believe our results reflect the strength of our core business across our three primary initiatives -- Search, Ads, and Apps -- with disciplined investments that position us very well to capitalize on the long-term opportunities we see for Google.[47]

Last night's financial results were great news for Google of course, and leave much of the rest of the financial markets in disbelief that the search giant continues to report such sustained growth in the face of recession.[34] Google's upbeat results come as two search agencies reported generally strong growth in client spending. SearchIgnite's mostly retail clients increased their year-over-year expenditures, but spending growth waned toward the end of Q1.[37]

Search engine giant Google dismissed concerns over its future growth rate by revealing a 20pc growth rate in customers clicking through to paid-for adverts and a 31pc rise in profits.[17] The company said there were up 20 percent from a year ago, though down from 30 percent growth rate of the previous quarter.[25] Operations from outside the U.S. contributed over half of the company's total revenue (51 percent) for the first time, contributing 51 percent of all revenues in Q1, compared with 47 percent a year ago. The company also cited adoption of its AdSense for Video ads, and higher-than-banner click-through rates for the placements.[37] Although management downplayed, to some extent, the effect of ad quality improvements, Lindsay estimates that revenue per U.S. paid click grew by 12 percent sequentially and 27 percent year-over-year.[22] The company claims that the dip in paid clicks was part of an effort to improve ad relevance and increase revenue for advertisers.[42]

Google CEO Eric Schmidt on the call reiterated the company's position that the decrease of paid clicks is predicated on offering quality over quantity.[1] Google's just-released results for the three months to March blow comScore's theory out of the water, with the firm saying the aggregate paid clicks increased by approximately 20pc.[17]

Growth in paid clicks, though behind the 30% pace of the fourth quarter, were still up 20% from the year-earlier period.[26] For the quarter, paid clicks declined 5.8 percent--a noticeable turnaround from the 29.3 percent drop in the fourth quarter.[40]

The growth rate of consumer clicks continues to slow, down from 30 per cent in the fourth quarter of 2007 and from about 50 per cent in each of the four quarters prior to that.[44] We know that if we can improve aggregate quality we know that the value of a click, number of clicks and so forth will grow, and will grow at whatever the technology will allow. If you look, our absolute growth rate has been very, very significant and we'''re very, very optimistic that this model of staying focused on quality will give us not only the strongest ad network but a much broader set of solutions for advertisers and it works well.[47] A 10% drop in the growth rate of paid click is to be concerned rather than celebrated about. The company can say it is compensating for this with higher yield per click. This does not change the fact that raw clicks are approaching saturation.[26] Part of that must be due to your quality initiatives. Do you think about it terms of trying to get to a paid click growth at a certain anniversarying of these paid click quality improvements whereby that growth will remain in the 20% or low double-digit rate at a more sustainable basis because of these quality improvements? Thank you.[47]

Paid clicks in the U.S. business likely grew only in the high single digits (less than half of the 20% reported growth).[36] Paid click growth on Google.com in the U.S. remains healthy and other markets are showing strong growth as well.[8] "The business model continues to work very well and we've had good, disciplined management of our operating expenses, so thank you very much for the management team. It's also interesting to note that paid clicks growth is much higher than has been speculated by third parties."[8]

To be sure, growth in paid clicks has taken a hit, rising just 4% year-over year compared with 20% in 2007 over 2006, but that's better than the negative growth many had feared.[23]

Earnings for the first-quarter of 2008 jumped from $1bn to $1.31bn, with the internet search firm claiming growth in 'paid clicks'.[48] The Internet search giant said net income was 1.31 billion, or $4.12 a share, compared with $1 billion, or $3.18 a share, in the first quarter of 2007.[25] The Mountain View, Calif., search vendor reported net income of $1.31 billion on $4.12 per share, from $1 billion on $3.18 a share in the first quarter of 2007.[1]

Net income last quarter rose 30 percent to $1.31 billion, or $4.12 a share, from $1 billion, or $3.18, a year earlier.[29]

Partner site revenue was $1.69 billion, or 33 percent of the total, while revenue from Google's own sites made up the remaining $3.4 billion.[37] Sales, excluding revenue passed on to partner sites, climbed 46 percent to $3.7 billion, beating the average estimate of $3.59 billion in a Bloomberg survey of analysts.[39]

Analysts polled by Thomson Financial were expecting earnings of $4.52 a share on revenue of $3.61 billion.[20] Wall Street currently expects revenue to grow by 42% for the quarter while earnings per share is expected to increase by 24%, according to estimates.[28]

Fri Apr 18 05:22:42 GMT+02:00 2008 Google Inc.' s go-go era apparently isn't over. The Internet giant topped Wall Street estimates for first-quarter revenue and profit, and it said that the weak economy hadn't hurt its business, as some investors had feared.[33] In January, after Google reported fourth-quarter profit and revenue that trailed analysts' estimates, Schmidt said, "There is no evidence to date of an economic slowdown.''[21]

Google reported a profit of $4.84 a share, excluding stock-based compensation and other items, up 32% from the year-ago period and above the $4.52 estimate of analysts polled by Thomson Reuters.[2] Like the girl in the movie who turned out to be cute once she took her glasses off, Google ( NSDQ: GOOG ) is feeling loved. Following last night’s report, shares are trading up nearly 17 percent (about what they did after hours), and analysts all of the sudden have only nice things to say about it. Bernstein's Jeff Lindsay, who has stayed solidly bullish, titled his report Google: The Silence Of The Cynics.[22] "The analyst and investment communities had pretty much taken a flamethrower to Google over the last four months," said David Garrity, an analyst for Dinosaur Securities. That ended with the first-quarter report, issued after Google shares fell 1.2% in regular trading.[2]

Hitwise, for example, says Google has a 67 percent share of the search market, while comScore reads it at 60 percent. [14] Google now commands a mighty 59.8 percent share of Internet searches, to 21.3 percent for rival Yahoo and 9.4 percent for Microsoft, according to ComScore. Microsoft is seeking a solution to its declining share by making a hostile takeover bid for Yahoo.[31]

Incidentally, ComScore said on April 16 that U.S. Internet users viewed more than 10 billion online videos during February 2008, a 66 percent gain versus February 2007. More than a third of those were viewed on Google's YouTube video property.[5] Google captured 63 percent of Internet queries worldwide in February, up from 62 percent in December, according to Reston, Virginia-based ComScore Inc. Google accounted for 60 percent of U.S. searches in March.[39]

In the U.S., for instance, the Comscore data indicated U.S. paid-clicks grew merely 1.8%, and while Google did not specify U.S. paid-click growth, management did indicate domestic paid-click growth was "healthy" and, we surmise, much stronger than Comscore data implied.[8] International sales soared 55 percent, outpacing total growth and allaying concerns that Google is suffering from a U.S. economic slump.[29] For the quarter, Google said paid-click growth grew by about 20 percent over the year-ago quarter.[20] ComScore, which issues monthly reports on ad-click numbers, said the growth had slowed to 1.8 percent in the first quarter.[29] As is typical in the first quarter, the UK was strong with revenues of $803 million and 16% sequential growth as the travel and finance verticals rebounded as expected from Q4.[47] Financial firms cut back spending after the subprime mortgage meltdown spurred the near- collapse of lender Countrywide Financial Corp. and investment bank Bear Stearns Cos. "I was surprised their revenue growth was so strong,'' said Jane Snorek, who helps manage more than $70 billion in assets at First American Funds in Minneapolis. The economic concerns haven't disappeared, she said. "They can't be immune. None of those worries go away,'' she said. Consumer sentiment in the U.S. fell to its lowest level since 1982 this month, according to a preliminary report from Reuters and the University of Michigan, as employers cut hundreds of thousands of jobs and oil prices climbed to a record.[29]

Looking at the U.S. growth rate of 30% approximately in the first quarter, if you had to characterize your small, medium-sized self sign-up advertisers versus your large agency or direct enterprise-sized advertisers, which segment was growing faster in the quarter relative to that 30%? Thanks.[47] For the first quarter, the paid-click growth rate was only 1.8% compared with the previous year -- which represents a sharp slowdown from the 25% growth rate in the previous quarter.[28]

In either case, the growth is down from 52 percent in the first quarter of 2007. "It's a far cry from where it used to be,'' Snorek said.[39]

Google's performance in the first quarter increases the pressure on Microsoft, said David Garrity, director of research at Dinosaur Securities Inc. in New York.[29] In the first quarter of 2005, Google's TAC percentage came to 37.2%. It was 31% in the first quarter of 2007, 29.9% in the second quarter, and 29.1% in the third quarter.[19]

Net income at the search giant jumped to $1.31bn (£656m), up from a flat $1bn (£501m) in the first quarter of last year.[51]

Select third party data indicating material Search fundamental deterioration was anotherBut that's all history nowWe are reiterating our Buy on GOOG Shares." There is certainly more where that came from, but you get the idea; this morning they are dancing in the streets of Mountain View. Google this morning is up $86.43, or 19.2%, to $535.97.[24] The number of people clicking on search advertisements through Google Inc. grew at a slow pace March for the third straight month, according to data from the research group comScore Inc.[18] ComScore's Mr. Abraham says some people have jumped to conclusions that comScore's data don't support. "People automatically assumed Google's revenue is going to be missing their target," he says.[4]

Immediately after the sell-off, though, comScore rushed to Google's defense, arguing that the decline was part of the company's grand plan to deliver hotter leads to advertisers, which would potentially lead to higher ad rates.[38] Social networking is a challenge when it comes to advertising. Google ads appear on its own Orkut site and on News Corp.' s MySpace, and there's "a tremendous amount of inventory" to be sold, Brin said. "It takes some time for some advertisers to realize they're there and target them effectively," Brin said.[6] Better tools for advertisers, many, many quality improvements in advertising which has the interesting effect, which means that we'''re showing fewer but much better ads in each cycle. That'''s a key part of the Google success story. We'''re putting more and more flexibility and control in the hands of advertisers so they can decide exactly where their ad should go and measure it in the way using Analytics that they could not do before. It allows us to offer a much more comprehensive solution for advertisers and publishers. This has been asked for long time and now we are able to do it.[47]

Derek Brown, Cantor Fitzgerald : "We fully recognize that the party at Google has to end some time. We see no clear signs that Google's business has hit the proverbial wall, or consumers and advertisers are shifting their behavior away from Google and toward its competitors." He maintains a Buy rating and $750 target. Clayton Moran, Stanford Equity Research : He's one of the few bears remaining.[24]

Google Inc. silenced its critics yesterday with quarterly financial results that blew by expectations and calmed fears about the vulnerability of its ad business in hard times.[44] The Web search king's fast-growing ad sales sparked another better-than-expected quarterly earnings report at a time when some analysts had been hinting at possibly disappointing results.[2] Chairman and Chief Executive Eric Schmidt told investors on a conference call the company's Web search and advertising business has seen no impact from macroeconomic weakness. "On the macro side we've looked at this really carefully and we do not see an impact as of this time," Schmidt said in response to an analyst's question about how wider economic trends would figure in its business.[52] Asked about the prospect of Google fully taking over Yahoo's search ad program, Schmidt said, "We're very excited to be participating in the test. It's not appropriate to speculate beyond that."[31] "We like them very much," Eric Schmidt, Google's chief executive, said of Yahoo. Google executives also told investors Thursday that they wanted to steal Yahoo's biggest market: display ads on the Internet.[45]

Google chief Eric Schmidt credited "innovation in search, ads, and apps" for the increase in the bottom line.[50] Google said it has continued to take measures to reduce the number of ads that consumers see per search query in order to show only the most relevant ads, which will lead to sales for advertisers.[33] Analysts and Google pundits are split on what the ComScore numbers mean. Google maintains that its deceleration has more to do with its efforts to improve the quality of its ad leads (which should drive up average selling prices) than a broader economic slowdown.[40] Contrary to popular perception (and Google's quiet crowing on the call last night), Comscore's U.S. paid-click reports were directionally accurate. If the reports hadn't spooked analysts into cutting their estimates, Google would have missed consensus.[36] ComScore's estimates had fueled concerns during the quarter that Google was being hurt by the softness in the U.S. economy, though the research firm said the cause was more likely Google-initiated changes.[33]

UBS analyst Ben Schachter wrote that the company "would need to have implemented significant monetization improvements during the quarter in order to meet consensus estimates. Google may have made some pricing improvements, but we don't believe they will be enough."[18] Canaccord Adams analyst Colin Gillis has remained bullish on Google's prospects throughout the company's stock slide. While others were dropping their expectations, Mr. Gillis maintained his price target of $755.[44] Google hasn't been above the $500 mark since Feb. 22 -- a far cry from November, when the stock was soaring the $700 range and analysts were setting lofty price targets, some as high as $900.[10]

Google's recent stock slide wiped out more than $75bn in market value. It would appear Google's phenomenal growth machine hasn't run out of gas quite yet.[42] In 4 p.m. Nasdaq Stock Market composite trading, Google's shares dropped $5.49, or 1.2%, to $449.54.[33] Since November, Google shares have dropped about 40 percent since hitting $747.24.[40] Shares of Google have fallen more than 30 per cent since peaking at $747.24 (U.S.) on Nov. 7, 2007.[44] Google shares rocketed 17.5% in after-hours trade, rising $78.94 to $528.48.[12]

This morning, the story is all Google (GOOG). Carrying through on last night's robust after hours rally, Google shares are poised for a huge gain this morning, after the company reported much higher than expected Q1 results.[24] Before the earnings were released Thursday afternoon, Google's shares had dropped 35% since the beginning of the year.[33] According to CNN Money, the news follows a weak fourth quarter last year, with earnings coming in under analyst estimates.[32] Excluding costs from stock options, profit was $4.84 a share, topping analysts' average estimate of $4.52. Analysts at Citigroup Inc. and Merrill Lynch & Co. raised their price targets for the stock to $630 and $600, respectively. Jefferies & Co. analyst Youssef Squali in New York boosted his rating to "buy'' from "hold.''[29] Excluding one-time items and stock option expenses, profit was $4.84 a share, a whopping 32 cents above the consensus estimate of analysts polled by Thomson Financial.[12]

April 18 (Bloomberg) -- Google Inc. posted the biggest gain since its initial public offering after profit trounced analysts' estimates, spurred by overseas growth and a bigger-than-predicted jump in the number of users clicking on text advertisements. [29] Brin also pointed to growth in Google's mobile-phone efforts. "Mobile search is growing very rapidly," he said, noting a faster search experience for users, now available in 40 languages. "In countries and markets where mobile is really developed," he added, "the experience works, like Japan."[20] Eric I think earlier you said you'''re not really seeing a meaningful impact on the business from the macroeconomic environment. The question is, is the sequential growth that you put up this quarter which is far lower than what it has been in the past, is that more a reflection of where we are in the search cycle, search out cycle in the U.S. or given that it'''s not really macroeconomic''' that would be great.[47] I don'''t think we consider Continental Europe less developed. I do think that in the advertising space, we have seen that they are sort of coming up on the ramps that the U.S. and UK might have been a year or two ago. That obviously gives us great opportunity for growth advertising-wise. In terms of basic Internet usage and searches per user, while once again I don'''t have the data in front of me, what we'''ve seen is it typically just depends on broadband penetration and quality of broadband and the more people have access to great networks and computers to use them the more searches and overall internet usage they will do. That'''s why you see this skew during the week, that Monday to Friday we do tend to get a lot more usage than on weekends. Obviously part of that'''s because people are relaxing off the Internet on weekends, but part of it also is that typically often people at home don'''t have as good connectivity and Internet access as they do at the office.[47]

We also rolled out Offline Docs using a new browser technology Google Gears where you get offline access to your Google Docs. I think people assume with this cloud applications they'''re really great, they are easy to run with, no installation of software they but you wouldn'''t be able to run them offline. We have a great new technology Google Gears as I mentioned that lets you run these new web applications even when you are not connected to the Internet.[47] Industry benchmarking is a new feature we launched so you can tell how you'''re doing against others in your same industry, and that'''s been a very popular feature. We find that Analytics''' customers, people who adopt Google Analytics, really just end up increasing their advertising spend with us as they better understand their metrics.[47]

ComScore forecast that the number of users clicking on Google's advertising links would rise a measly 1.8 per cent from the rate reported last year.[51] "If the comScore data is correct, then the cause is mostly due to quality initiatives instituted by Google rather than just slowing economic trends impacting online advertising," Robert Peck of Bear Stearns wrote in a report to clients. Peck added, however, that "we have not ruled out the latter."[28] Internet giant Google quieted its critics with an earnings report that showed little sign of an advertising decline, despite outside reports to the contrary.[31] Google's impact won't be limited to online advertising. If the company misses first-quarter expectations, its miss is likely to weigh on the entire stock market, and certainly on other internet stocks.[38] Last quarter, Google's financial performance fell short of Wall Street expectations, triggering fears that economic woes might be hurting the company.[6]

The fraction of Google searches with a paid ad fell 7%. ECONOMY - Is e-commerce getting hit by the weakening economy? Last quarter, Google said they hadn't seen any impact.[35] "We're very pleased with the quarter," Google CEO Eric Schmidt said on a conference call with analysts.[31] Analysts also have been curious about Google's test partnership with competitor Yahoo, which is fending off an unsolicited offer to be acquired by Microsoft. Pressed for details during a conference call Thursday, Google CEO Eric Schmidt declined, offering only that, "It's nice working with Yahoo, and we like them very much."[23] Yahoo!, Microsoft, News Corp, Time Warner and Google all play a role in the latest dramas around Microsoft's offer to buy Yahoo![10] Sterling says that if Yahoo and Google went all the way with the relationship, it would add $1 billion to Yahoo's bottom line.[31] To challenge Google in the $41 billion online-advertising market, Microsoft is trying to buy Yahoo for $44.6 billion.[30]

Cash: Google seems to print more money than the Treasury. It produced $1.8 billion in cash from operations.[45]

Without the change in currency rates, revenue would have been $202 million lower, Google said.[39] The quarter's higher-than-expected revenue seemed to back up Google's approach.[20] Gross revenue rose 42.0% to $5.2 billion in the quarter, up from $3.7 billion in the prior year.[12] Turning to our results, we had another strong quarter with gross revenue increasing 42% over Q1 2007 to $5.2 billion.[47] AdSense TAC was $1.3 billion, while TAC related to distribution partners and others who direct traffic to our websites totaled $143 million in the quarter. Other cost of revenue, which included $9 million in stock-based compensation increased $108 million over Q4 to $624 million.[47]

The online search giant's revenues hit $3.7 billion, also topping estimates by a wide margin.[41]

U.S. advertisers will spend $25.8 billion on Internet ads, eMarketer says, down 6.2% from earlier estimates but up 23% from $21.1 billion in 2007.[4]

The news, coming ahead of Google's first-quarter results today, is of interest given increasing concern as to whether the internet giant is being hit by the U.S. consumer slowdown.[16] Rosenberg said the campaign was only possible because publishers were adopting the plethora of new ad formats Google offered--including gadget ads, video and mobile--in addition to search.[13] I'm knowledgeable thanks to google's search engine, and I'm well informed with the latest world news thanks to google news.[45] On the Universal Search I think Universal Search is a very big win from the point of view of the Search experience. Now in some of these international markets like if you look at Korea in fact the local competitors there do have something that'''s very much akin to Universal Search. In fact I think the people'''s expectations there are already to have Universal Search results and so its not necessarily something new we are introducing to them there. I think our ability to rank and bring in these diverse corpuses that we have will surprise people and they will be impressed by how good it is. In other markets you are right, I think that these additional corpuses and our ability to blend is a substantial distinction and I think we are going to benefit from that in fact and obviously we have lots of international or foreign language videos and images and so forth and we have a certain number of books as well in there. I think we are going to benefit from all that hard work that we'''ve put in those corpuses.[47] Niche sites are also a natural fit for associated advertisers. http://www.cnn.com/2008/TECH/04/16/online.communities.ap/ Generic dot com domains that describe major markets and subjects are increasingly being developed as well. They are found around the clock by people who type the decriptive domain name directory into their browsers. Return visitors do the same, as such names are hard to forget. Big business knows the power of controlling the dot com domain that decribes the market (or markets) into which they sell. They are increasingly buying them (think Pizza.com which was purchased last week for a song compared to its likely future revenue generating capablities). If you are interested, below is a link to a selected list of decriptive domains now owned by major corporations: http://www.genericdomainnames.com/info/Generic-Domain-Name-Ownership/i=9. All of these sites benefit greatly from search engine page referrals. They have the added benefit of the generic dot com domain that decribes what they sell. Combined with Search Engine Optimization, this constitutes the ultimate web presence and business marketing strategy.[26]

Disappointing numbers at all the major search sites may indicate that there's a broader economic explanation than Google's improved quality control.[40] You'''ll notice that you can now search within a site directly from the Google Search results.[47] Go beyond Google and get vertical. These specialized search sites will help you find the business information you need -- fast.[19] April 17 (Bloomberg) -- Google Inc., owner of the most popular search engine, faces a deteriorating market for consumer advertising after incurring a drop in business from financial firms.[21] Yahoo, in trying to keep Microsoft away, is exploring other options and is in the midst of a two-week experiment to outsource search advertising to Google.[31] I would still be somewhat pessimistic about the future, when, not if, Microsoft mergers with Yahoo and Google has a real competitor in the search market. This may be the bottom in the stock price, but the future appreciation will be muted.[24]

Yesterday I was reading a stock message board on Google and the ad on the side of the screen caught my attention: "Build your own massive dildo!".[26]

At the time, Google said the change was related to efforts it made to cut down on "accidental" clicks on ads.[27] Google generally charges advertisers only when a consumer clicks on the ads.[33] Microsoft, Yahoo and advertisers had argued that the acquisition would give Google too much control over the prices of online ads, but the European Union said the purchase won't curb competition in that market.[27] According to Jonathan Rosenberg, Google's senior vice president of product management, the goal is to become "the world's largest display advertiser" while getting publishers and marketers to buy into a Google-centric multichannel ad platform.[13] Activision, for example, used seven of Google's ad products when it launched Tony Hawk's Proving Ground last year.[13]

Paid-search clicks at Google were up 2.7 percent in March, compared to the same month a year ago.[40] Your welcome google. I make sure to search "Car Accidents" and click those links 1000 times a day Ooops.[45] Google has found ways to rather dramatically increase the revenue it earns from each click.[45] Shmidt said that any slowdown in paid clicks is attributed to the company examining more quality advertisements in fewer number, which would actually generate more revenue per click.[32] Letting Comscore off the hook for being way, way off about U.S. paid clicks but being "directionally correct" is a joke, like getting busted for speeding in a school zone, and saying you might be over the limit, but at you had slowed down and were "directionally correct". Anyone think of other great moments in the history of being "directionally correct"? I'm thinking of explorer La Salle landing in Texas instead of the Mississippi delta, or maybe when he sailed from there aiming for Canada, got lost, ended up back in Gulf of Mexico, and his crew murdered him. That sort of thing.[49] Paid clicks refer to the sponsored, or paid, results that appear on the right-hand side of a page of search results.[20] There still is a pretty clear level of deceleration in the paid click growth on a year-over-year basis even if you trend line it going back a year-and-a-half.[47] It'''s also interesting to note that paid clicks growth is much higher than has been speculated by third parties.[47]

"Paid click growth is much higher than has been speculated upon," Schmidt said.[31]

In that report, the company first disclosed a slowdown in the growth of paid-clicks, which was blamed on quality improvement initiatives designed to prevent accidental clicks.[28] Late Tuesday, ComScore put out a report suggesting that growth in paid-search clicks in the United States is slowing down.[3]

"We've been pretty happy with our paid-click growth,'' Google co-founder Sergey Brin said in an interview after the report.[29]

Also. HIRINGS - How many employees did Google add in Q1? The company regularly reports this figure and analysts watch it for the impact on costs.[35] Google's share-price drop in the first three months of the year was the worst quarterly performance since the company's initial public offering in 2004.[21] The Mountain View, California-based company said it earned $1.31bn, or $4.12 per share, during the first three months of the year. That's a 31 per cent increase from net income of $1bn, or $3.18 per share, in the same period last year.[42] Net income rose to $1.31 billion, or $4.12 a share, from $1 billion, or $3.18, a year earlier, the Mountain View, California-based company said today in a statement.[39]

Adjusted for one-time items, the company earned $4.84 a share, beating analyst expectations of $4.52.[23] Excluding various items, that meant earnings per share of $4.84, well above the $4.52 expected on average by analysts surveyed by Thomson Financial.[6]

Whatever the case, the paid-click issue is top of mind for analysts heading into Google's first-quarter earnings call after the market closes April 17.[5] Google also has the chance to set a positive tone for the rest of the tech earnings season (a role that traditionally belonged to Yahoo, which won't report until next Tuesday).[14] GOOGLE GOLDMAN, FAST MONEY - More like Jim Goldman on Google. The Fast Money team also chimed in on this afternoon's earnings report.[35]

The earnings "put Steve Ballmer and Microsoft in a little bit of a corner, which probably people at Google don't feel so bad about,'' Garrity said today in a Bloomberg Television interview. "This does set things up very well.''[29] As the U.S. economy slows, anxiety is mounting over Google's first-quarter earnings announcement, which is scheduled for Thursday.[38] Some analysts worried Google might be feeling the impact of the slowing U.S. economy.[20]

The markets didn't agree. Update: comScore's Andrew Lipsman blogged about this today: he said it is important to use "apples to apples" comparisons and noted that comScore was referring to U.S. data while Google detailed global figures.[34] In the wake of Google's solid Q1, GOOG is flying, SCOR is getting smashed, and all the world is peeing on the web rating firm's credibility. That's all fine and good, but before you waste too much energy trashing Comscore, at least acknowledge that the firm's data got a lot right.[36] On IM, I pinged Charles Cooper, who I bicker with all day long, and noted that Schmidt basically said "go long Google, short Comscore."[8]

"We're showing fewer but much better ads in each cycle, and that's a key part of the Google success story," Mr. Schmidt said.[33] In a conference call, Google Chief Executive Eric Schmidt said the achievement shows Google is "a truly global company."[20]

Chief Executive Eric Schmidt got straight to the point as he opened up Google's quarterly earnings conference call.[3]

Investors have worried that a consumer slowdown could affect online advertising, which represents about 99% of Google's revenue. [33] Not even ' headwinds ' can stop the presses at Google from printing money: The search giant quieted investors' fears by soundly beating expectations.[26]

If you search Google for "iPod accessories" for example, you will see a few sponsoredor paidlinks at the top of the page and a longer list along the right-hand side. Those are both types of paid links. The remaining links are not paid for but show up because, theoretically, they have the most relevance to the search.[11] In China, Google lags Baidu.com as the top search engine but hopes to take the lead within five years.[6] Google posted a 31pc rise in profit after tax of $1.31bn, against $1bn in the same period last year.[17] To be sure, some of Google's performance was the result of the rise of overseas currencies, which added $202m to sales.[42] Mary Meeker and David Joseph, Morgan Stanely : "Our conviction in Google's 1-3 year business outlook remains high, with Q1 results providing an exclamation point.[24] While exercising operational discipline, we continue to explore opportunities that add value to users everywhere and to Google in the long term." Meanwhile the financial intelligence firm ComScore saw its value drop eight per cent in after-hours trading yesterday, following discrepancies between its predictions and Google's final results.[51] Google captured 63 percent of Web queries worldwide in February, up from 62 percent in December, according to ComScore.[29] Why? There's another thread to ponder here: Google and Comscore's data may not be that far off.[8] A month ago, at the suggestion of a reader, we proposed a Google-earnings pair trade for people with balls: LONG Google, SHORT Comscore. This morning, traders who played that ticket are winning big.[36] Cost cutting : Google only hired 800 people in the quarter, a much slower pace than it has been.[45] In the conference call, co-founder Sergey Brin, said Google made "over 100 search-quality" improvements in the quarter, or more than "one per day." Those improvements include work on Google's international sites.[20] Well thank you very much, Krista, and we'''re obviously very pleased with another strong quarter for Google.[47] We'''ve also made improvements there, of course. If you recall the clickable backgrounds that we eliminated recently which while they reduced clicks a little bit increased the quality of clicks, and I think our advertisers certainly appreciate that. There are likewise -- I don'''t know the exact number -- but there are certainly dozens, if not 100 improvements in advertising quality that we also launched over this quarter. That'''s going to benefit advertisers and it'''s going to benefit end users who are going to see more relevant, interesting advertising and obviously because those connections can be more fruitful, ultimately that benefits publishers as well.[47] We know that it is not macroeconomic. It can have as much to do with the timing of deals, partner activity, the timing of product rollouts and the maturity as you pointed out of the U.S. market; also the rate at which both search quality improvements play out within the quarter as well as advertising quality, because again they don'''t necessarily implement exactly linearly in the quarter across every geography.[47] The search engine giant turned in first-quarter results that showed not only that users are still clicking on the company's ads, but that the online advertising market is strong even in the face of U.S. recession fears.[44] The Company provides targeted advertising and global internet search solutions as well as intranet solutions via an enterprise search appliance.[14]

Combine the dominant web search franchise with an amazingly successful advertising model and you have the core of Google.[35] Millions of people use 's search engine every day to find the answers to questions.[14]

The other factor essential to Google's strong Q1 performance was the the achievement of a 51% non-US, 49% U.S. revenue breakdown.[26] Revenue estimates below exclude TAC. READ IT TWICE - This ain't simple, the way Google makes money on the Interweb.[35]

International sales accounted for 51 percent of revenue last quarter, up from 48 percent in the fourth quarter.[29] For the quarter, it managed 0.3 percent growth, versus a 15.8 percent increase in the fourth quarter.[40] Bear Stearns's ad spending fell 10 percent in the fourth quarter from the third.[39] Blockbuster Inc., the movie- rental chain, lowered ad spending by 26 percent last quarter.[21]

Mortgage lender Countrywide's fourth- quarter ad budget dropped 5 percent from the third quarter.[21]

Google has vastly reduced the number of ads on a page in the hope of better targeting. [50] Google's strong showing, combined with similar reports from International Business Machines Corp. and Intel Corp. this week, suggests that international technology companies are capable of weathering U.S. economic woes.[44] Google has made plenty of comments on the state of the company's business and the overall economy.[35] Expenses related to payroll and facilities increased $53 million over Q4 to $809 million. An additional 15%, approximately, are expected to leave the company in the U.S. in the near to intermediate term, because they are in a transitional role as they move through the system. These headcount reductions apply only to the U.S. and do not include employees associated with the future planned divestitures of the Performics SEM business. We have implemented and continue to follow a disciplined hiring process in all areas of the organization, but as we'''ve indicated in the past, we will continue to invest in our core business both in the U.S. and internationally.[47] The company reported revenue of $5.19 billion and profits of $1.3 billion.[31] Revenue climbed to $5.19 billion, from $3.66 billion a year earlier.[25] Revenues jumped by 42% year-over-year to reach $5.1 billion--trumping Wall Street's consensus of about $3.5 billion.[13] Now turning to expenses, traffic acquisition costs were $1.5 billion or 29% of total advertising revenue, down from 30% in Q4.[47] We continue to anticipate that other cost of sales could increase going forward. Other than cost of revenue, operating expenses in Q1 totaled $1.5 billion, including approximately $272 million in stock-based compensation.[47]

Sales rose 42 percent to $5.2 billion, with advertising sales netting a total of $3.7 billion, beating predictions of $3.6 billion. A conference call with CEO Eric Schmidt revealed that he and the other board members do not see an impact from broader macroeconomic trends.[32]

The company's stock surged more than $76, or 17 percent, to $525 in after-hours trading.[6] Excluding costs from stock options, profit was $4.84, topping analysts' average estimate of $4.52.[39] Profit beat Wall Street estimates by more than 30 cents a share, excluding costs from stock options.[39]

The recent selloff of GOOG shares was unwarranted. It is definitely a solid growth story stock.[26] As we hopefully gain share we have significant new products for the Chinese, Knowledge Chinese, Users Chinese Language, Chinese Search and that'''s our core growth, so the message there is good.[47] Our Mobile Search traffic, as a result, and just due to market growth, is growing very rapidly. That'''s for Search, but actually across other properties also, we'''ve now launched a new version of our YouTube mobile site and mobile users now can access the entire library of videos.[47]

Now I'''ve told you in the past year how we have deployed Universal Search and I mentioned a number of times but the work wasn'''t done with the initial launch. Over the past year since we launched it we'''ve been able to double the number of queries where we show these blended results especially in images, video and books. I'''m sure many of you are seeing these all the time. This has really improved our ability to answer questions.[47] Fresh comScore data shows that the number of paid-for clicks in March rose by 2.7pc against the same month last year.[16] Most importantly! Comscore alerted analysts to a surprising deceleration in the U.S., one that was borne out in the Q1 results. If analysts had dismissed the Comscore data out of hand and refused to cut their estimates, they'd be nursing some major wounds this morning.[36] If it hasn't, and the comScore data is accurate, U.S. revenue will miss by a mile," writes Mr Blodget.[16]

My question is focused on the U.S. revenues which grew $29 million sequentially.[47] International revenue increased to $2.65 billion, now accounting for 51% of total revenue.[47]

Finally turning to cash, operating cash flow remained strong at $1.78 billion with CapEx for the quarter at $842 million.[47]

Equally worrisome to analysts and investors is the looming possibility of a recession. (Economists define a recession as two successive quarters of negative growth.[38] Mr. Schmidt dismissed the third-party data that had worried investors. "Paid-click growth has been much higher than has been speculated by third parties," he said.[44]

"We are seeing market-share growth and good revenue growth as we have learned to operate in that environment," Schmidt said.[6] According to CFO George Reyes, revenue growth on Google.com was up 49 percent, driven by strong traffic increases and, to a lesser extent, monetization growth.[37] "We expect higher growth for revenue and less for earnings, largely because of the MySpace deal.[38] Thanks, two quick questions. The second question may be for George, just the other cost of revenue growth is really about 80% if I back out some of the stock-based comp.[47]

Although the advertising business is nascent in China, the fact of the matter is that the Chinese Internet is so large that even on a small basis the numbers add up to quite significant with good growth rate.[47] On the seasonality I'''m not sure I agree with that characterization. There are so many variables that have to do with product improvements, product launches, customer deals, renewing and change in TAC rates, all of those kinds of things, it'''s very difficult to say that looking at an aggregate number, in particular a change in seasonal growth rate, was a very big deal.[47]

What with declining growth in click-through rates and concerns about the robustness of the search business, that hasn't been the case of late.[3]

"While last night's report provided relief that trends had not materially worsened, growth is slowing and margins are pressured. As such, we maintain a somewhat cautious view and a Hold rating." With GOOG successfully decoupling from the sluggish U.S. economy (note that posting 31% year-over-year sales growth in the U.S. hardly qualifies as sluggish), it is likely that GOOG shares have seen their low for 2008.[24] Douglas Anmuth, an analyst at Lehman Brothers Holdings Inc. in New York, had expected a drop in finance-related searches to curb sales growth.[39] "The fact that Amazon's early growth does not appear to be at the expense of Apple iTunes is a healthy indication that the digital music customer pool can expand into new consumer groups who have not yet joined the iTunes community," said NPD analyst Russ Crupnick in a statement. NPD says Amazon is now second only to iTunes in the a la carte digital download category (for those keeping score).[23]

Some interesting demographic breakdown has emerged between the two services as well. NPD says 84% of Amazon customers are male, compared to 44% of iTunes, but only 3% of Amazon customers were teens, compared to iTunes' 18% (the latter attributed primarily to the popularity of iTunes gift cards.) NPD says Amazon's growth is likely more due to existing Amazon customers adopting the new service rather than due its lower pricing or DRM-free policies.[23]

Asia and Latin America continue to show impressive growth as well with India, Argentina Australia and Japan being notable performers in the quarter.[47]

I'''m very excited about the quarter as well and I'''m going to talk to you a little bit about ads and applications.[47] We have a 2008 plan that has a very specific milestones again all the way from the systems and infrastructure that we need to provide that integration all the way to the different types of ads. I think it'''s very early to make any kind of a judgment about which ads are working well and which ones are that we'''re really trying to have these integrated campaigns, try it out with the salesforce and our customers and do a lot of learning and settle in to a product roadmap.[47] You can imagine just the rate of that is incredible. We have in-video ads, which have great adoption on YouTube and customers are increasing the size of their campaigns. We'''ve now launched AdSense for videos, so now these in-video ads can run on sites besides YouTube and they may perform very well; we are seeing much better click-through ads than banner ads and that'''s a really big deal and we'''re really excited about that. They are a technology and networking partner, a tremendous asset and we'''re very excited about what we can do together.[47]

We'''ve deployed Street View in 30 cities now, up 12 from the past quarter. Our new Street View API has got other sites integrating Street View with them. We are also at the same as we are spending a lot of effort collecting this data ourselves from Apps, we'''re including user contributed data. We now allow users to correct information about local entities and locations on their maps. In fact you can see recent changes as they happen right now if you go to maps.google.com/recentedits. I also want to quickly highlight that we have been working on difficult queries, the challenging ones and we had a substantial initiative over this past quarter where we were able to make a very large improvement in what we consider the hardest 20% of our queries. That was a big achievement and it really stands out in my mind.[47]

I think there are some other Google properties that might be good fits though we haven'''t made clear decisions; I mean obviously more visual sites like Orkut there is some potential in Google Images but we don'''t have any specific plans to announce today in that respect. I also think that we are certainly making progress on display in our network also and so I'''m pretty optimistic on both fronts.[47] We work very hard to maintain the best possible environment for our employees and I think that'''s part of why you see the results that you do out of Google.[47]

Let'''s finish up by saying first thank you very much for everybody spending -- your time is valuable, spending more than an hour listening to us and talking about Google.[47] SAN FRANCISCO (Reuters) - Google Inc has seen no impact from broader economic weakness in its own business and is confident its targeted advertising can withstand most economic scenarios, its CEO said on Thursday.[52] I don'''t have the exact data in front of me right now, as I said, but there is certainly nothing to dissuade me that it would be substantially worse than traditional desktop search. I think that if you look in the U.S. and Europe which are a little bit behind those but I think are progressing, I think you'''ll increasingly a greater volume and a greater quality of mobile usage and consequently advertising conversion ultimately.[47] "Targeted advertising does well in pretty much most scenarios, we think," Schmidt said. "We do not see an impact as of this time."[7] Chief Executive Eric Schmidt said that the Mountain View, Calif., company has studied the potential for any impact from a weaker economy in the future. "Our conclusion is we're well-positioned, should economics change, to continue to do well because our model is so targeted, and targeted advertising does well in pretty much most scenarios," he said.[33] Schmidt said the company was not seeing an effect from macroeconmic conditions. He expressed confidence the Internet giant was "well positioned" should economic conditions change.[20]

As for a permanent Yahoo search partnership that had been dubbed "increasingly likely" by Wall Street Journal sources, Schmidt would only allow that the giant was excited to be participating in the test. "It's the beginning of the second week and we can't speculate beyond that, but it's nice to be working with Yahoo," Schmidt said.[13] People familiar with the matter have said that test, announced last week, has been performing well, increasing the likelihood of a broader pact. Any such deal would probably face tough regulatory scrutiny because of the companies' combined majority share of the search-ad market. Mr. Schmidt declined to discuss the test in any detail, but he said, "It's nice to be working with Yahoo -- we like them very much."[33]

The shares have fallen by more than 40 percent since hitting $747.24 in November.[11] The shares, which debuted in August 2004, reached $535.50 earlier, a 19 percent increase.[29]

Analysts had predicted net income of $3.96 a share, according to the Bloomberg survey.[39]

The overall effect was immaterial to revenue and only slightly dilutive to operating income, net income and earnings per share.[47] On Tuesday afternoon, Intel executives signaled confidence in the coming year. IBM, another one of those tech bellwethers, reports its first-quarter earnings after the stock market closes this afternoon. By the end of this week, we'll have a better sense of whether it's time for tech companies to batten down the hatches.[40] Please refer to our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2007 as well as our earnings press release for a more detailed description of the risk factors that may affect our results.[47]

Good afternoon, everyone and welcome to today'''s first quarter 2008 earnings conference call. [47] Excluding stock-option expense, the company recorded per-share earnings of $4.84.[20] GSIT makes high-speed chips for Internet bandwidth. Like its high cash flow, good earnings, very low valuation and solid growth.[24] Just trying to add little more to color to Omid. We definitely tend to see that it is the larger customers that are the bigger drivers of growth, whether or not on a relative basis in the previous year they were bigger drivers I think is unclear. We have released a lot of tools like Analytics and the Conversion Optimizer and those are the type of things that tend to get adopted disproportionately by the larger, more sophisticated advertisers and we do see that as advertisers adopt those tools it substantially fuels growth.[47] From a customer relationship standpoint, on the display side we are very, very active in taking advantage of our properties, especially YouTube and the content network to increase the customer engagements. Just this past quarter, I can just name a few of these names which I think will indicate to you perhaps the nature of how we'''re utilizing the salesforce to reach significant types of customers that we haven'''t had as advertisers before: Nature Valley, an incredible campaign through YouTube, utilizing everything from the contest platform, brand channel, Contest Gadgets, the content network, FeedBurner so the complete host of our products. Other names like Forex which used CPC placement targeting; Toyota, we actually even had the World Economic Forum at Davos using the YouTube platform; Dunkin''' Donuts, VeriSign. Quite a diversity of advertisers now that we are working with through this integrated relationship across all the properties.[47]

"I don't think that kind of foreign currency benefit was expected,'' said Jane Snorek, who helps manage more than $70 billion in assets at First American Funds in Minneapolis. [39] Excluding capital expenditures and other operating costs, the search giant posted a net operating income of more than $1.8 billion, with free cash flow at $938 million.[13]

The Search, Ads and Apps strategy that we articulated last year is beginning to show transformative effects; literally things that people could not do before the products and services that we'''ve offered in each of the categories.[47] As mobile networks improve in the U.S. and in Europe, there will be greater usage and volume, and "ultimately a greater conversion" of people who click on mobile ads, Brin said. Those ads will also be "more relevant" and offer more timely information because, in a nod to the location abilities built into phones, they will be based on "where a person is," he added.[20]

Paid clicks increased 2.7 percent in March compared with the same month in 2007.[11] Aggregate paid clicks grew approximately 20 percent over Q1 2007 and approximately 4 percent over Q4.[8]

We look at the problem of paid clicks as one of the components of an overall quality improvement.[47] For February, paid clicks picked up a bit, growing by 3% but still far from the 13% increase in December.[10]

On the search results page, click "Transcripts" to filter the results to show transcripts only. [47] Thanks, George. We are obviously very excited about this past quarter and in listening to the results you'''ve heard so far, let me highlight some of the incredible Search improvements we'''ve made in the past 90 days. We have launched almost 100 Search quality improvements just in this quarter, so we'''re talking about over more than one per day, including weekends. A lot of these have been international Search quality improvements.[47] This is Jonathan adding one narrow point and one broad point on your question about seasonality. Narrowly within each quarter, there are things that make one year significantly different from another; this year you had Easter falling actual in Q1 whereas in previous years it has fallen in Q2. Offsetting that this year you had a leap year which in this year was actually on a Friday although since it added one more day in the quarter, the net results of leap year was giving us one more Monday in the quarter.[47]

The stock went on a dramatic 25% round-trip. GOOG was at $527 in the aftermarket after Q4 results were released, descended close to $400, and closed this evening in the aftermarket at around $525.[24] Some of the statements we make today may be considered forward looking, including statements regarding our investments, seasonality, traffic acquisition costs, increase in the cost of sales, international growth, operating margins, growth in headcount and our expected level of capital expenditures. These statements involve a number of risks and uncertainties that could cause actual results to differ materially.[47]

Some analysts say the company won't take much of a hit, because direct marketing outsells brand-promotional ads during recessions. The bottom line is that if consumers buy less stuff, advertisers will probably trim their ad budgets. [38] Analysts had said the company might be hampered by the slow economy and efforts to build video ad and display ad units.[2]

"The mobile ads work very well. There's nothing to dissuade me it would be any worse than traditional desktop search," he said. [6] I can tell you kind of anecdotally what I'''ve seen in the countries and markets where mobile has developed in the sense that devices have high resolution, networks have low latency, the experience works which basically like Japan and a few others that are up and coming, the mobile search and ads work very well.[47]

Related to that, if you could just give us an update on display and video ads and what types of ads you think are performing better and worse than expected? Finally, any update on the CFO search? Thanks.[47]

SOURCES

1. Google Quells Analyst Fears on Strong Q1
2. Googles Response To Slowdown Talk Is Solid Q1 Results
3. Google settles a score with ComScore | Coop's Corner : A Blog from Charlie Cooper - CNET News.com
4. Has Economy Hurt Google Search Ads? - WSJ.com
5. Google`s Paid Clicks Spark Fears of Weak Q1
6. Google clears Wall Street profit estimate | Tech news blog - CNET News.com
7. Google Profit Jumps 30% Despite Slowing Economy - washingtonpost.com
8. Comscore: The Google fallout | Between the Lines | ZDNet.com
9. SiliconRepublic.com: Google results defy downturn doomsayers
10. Googles Got Good Reason to Be Worried | Internet | EBAY GOOG IBM INTC - TheStreet.com
11. Google's paid-click numbers mystify -- chicagotribune.com
12. Google Regains Its Crown - Forbes.com
13. MediaPost Publications - Google Rides High On Strong First-Quarter Revenues - 04/18/2008
14. Will Google Earnings Save Tech? - Portfolio.com
15. Free Preview - WSJ.com
16. Revenue fears over Google ad-clicks - Telegraph
17. Google beats market expectations with soaring growth rate - Telegraph
18. Google click stats slump - East Bay Business Times:
19. Google Revenue Beats Expectation, Shares Surge -- Google -- InformationWeek
20. Google results shush critics -- chicagotribune.com
21. Bloomberg.com: Exclusive
22. Google Earnings: 'The Silence Of The Cynics' | paidContent.org
23. Wall Street ga-ga for Google in first quarter
24. Tech Trader Daily - Barron's Online : This Morning, It's All About Google
25. Google Profit Beats Wall St. Forecast - New York Times
26. Business Technology : Google Keeps on Rolling
27. Earnings Preview: Google | Chron.com - Houston Chronicle
28. UPDATE: Analysts Stay Positive On Google Despite Paid-Clicks Slowdown
29. Bloomberg.com: Invest
30. Business & Technology | Ad-click growth slowed on Google during first quarter | Seattle Times Newspaper
31. Hartford Business
32. Electronista | Google beats analyst estimates for Q1 2008
33. Moneyweb - Wall Street Journal - Google quiets growth fears
34. Google good, comScore bad? | PDA: The Digital Content Blog | Guardian Unlimited
35. Google Earnings Preview: Growing out of the "hole" at $450? - CNBC By The Numbers - MSNBC.com
36. Comscore Trashed After Google. Unfairly! - Silicon Alley Insider
37. Google Reports Strong Q1, Surprising Some - ClickZ
38. Analysts Doubtful as Google Quarterly Earnings Approach
39. Bloomberg.com: U.S.
40. Is there something wrong with Google's search ads? | Tech news blog - CNET News.com
41. Nightly Business Report . Google Makes Gains Despite the Slow Economy | PBS
42. Google earnings soar despite paid click dip | The Register
43. Free Preview - WSJ.com
44. reportonbusiness.com: Google overcomes slow economy, silences critics
45. Google: No Recessionary Problems Here - Bits - Technology - New York Times Blog
46. Google buoyed by 31% growth
47. Google, Inc Q1 2008 Earnings Call Transcript - Seeking Alpha
48. UTalkMarketing - Google profits uplift defies recession
49. Why Was Everyone Wrong on Google? - Seeking Alpha
50. Google Reports 30 Pct. Profit Rise - Computing News - Digital Trends
51. Google's revenues leap 42 per cent to £2.6bn - 18 Apr 2008 - Computing
52. Google says targeted ads can withstand econ slump | Technology | Internet | Reuters

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