MIAMI, 16 APRIL 2009 - Google grew its profit and revenue in the first quarter, ended March 31, despite a tough economic environment that is affecting online advertising spending, the company's main revenue engine.
Google reported revenue of US$5.51 billion in 2009's first quarter, up 6 per cent compared to the $5.2 billion in revenue it generated in the first quarter of 2008, the company said Thursday.
Subtracting commissions and fees Google pays to advertising and distribution partners, revenue came in at $4.07 billion, slightly missing the consensus forecast of $4.08 billion from analysts polled by Thomson Reuters.
Google had net income of $1.42 billion, or $4.49 per share, compared with net income of $1.31 billion, or $4.12 per share, in 2008's first quarter.
On a pro-forma basis, which excludes certain one-time items, net income was $1.64 billion, or $5.16 per share, beating the analysts' expectation of $4.93 per share, and exceeding pro-forma net income of 2008's first quarter, which was $1.54 billion, or $4.84 per share.
"Even when the economy and advertising are in the state they're in, Google is still capable of impressing," said Gartner analyst Andrew Frank in an interview.
During a conference call to discuss the results, Google CEO Eric Schmidt said he was satisfied with the quarterly financial performance, considering the global economic crisis, and attributed the rise in revenue to growth in search queries.
"Despite the tough economic climate, we think Google had a good quarter," Schmidt said, adding that he considers the economy to be "still basically in unchartered territory."
People are still using Google's search engines, but they're buying fewer and less-expensive products from advertisers, which means the sales conversion rates for ads are dropping, he said. As a consequence, marketers are spending less in order to balance their advertising return on investment (ROI).
"No company is recession-proof, and Google is absolutely feeling the impact," Schmidt said, warning that the company has now entered its historically weaker season: the second and third quarters.
However, he expressed confidence in what he considers the higher accountability and effectiveness of Google's search advertising model, particularly its auction-based approach to setting pay-per-click fees for ads. Google also benefits from the continued increase in Internet usage and the continued shift of ad spending to the online medium, he said.
"Google is now well-placed for the recovery when it occurs," Schmidt said.
"The first quarter demonstrated the resilience of our business model in a very severe global recession. We're going to continue to invest for the long term as we should and as we will," he added.
Gartner's Frank was struck by the focus that Schmidt and the other executives on the conference call kept on Google's core search advertising business, unlike other times when they devote more time to emerging business lines, like YouTube and enterprise IT software.
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