Google Profits Up
Posted on July 28th, 2009
Internet search giant Google reported a significant profit increase for the second quarter of this year, indicating that stabilization of the advertising market may be possible soon.
Google’s net income for the quarter posted an 18 percent increase, as its revenue increased by 3%. This was the lowest growth rate the company has posted in its 10-year history.
Eric E. Schmidt, Google’s Chief Executive, however, felt strongly about the profit surge despite the economic crunch. He shared that a quarter ago, the company had no idea where the bottom was. “We are at the moment not looking at the downward spiral that we thought we might see six months ago,†he said.
Mr. Schmidt said the internet search business seemed to have stabilized. He cited that advertisers in the retail and travel sectors were returning. He mentioned though that the finance sector was still down.
In an unprecedented move, Google executives recognized the growth in advertising on YouTube. Mr. Schmidt said that some of the advertisements on the online video-sharing site were showing “significant revenue growth and were faring better than they expected. He said that if the revenue growth continues, YouTube could be a profitable enterprise.
Investors initially seemed unimpressed with the company’s profit and shares went down about 3% in after-hours trading. This has changed however, as Google’s shares had recently risen sharply. Some analysts said the sell-off happened as investors try to lock in their gains.
Industry players who have been looking at Google for signs that the economy is soon recovering from the recession were disappointed. They said Google’s financial results merely showed that spending on search advertising, which is closely tied to online retail spending has bottomed out.
Ross Sandler, an analyst with RBC Capital said that disregarding fluctuations in currencies and other items, Google’s growth in the second quarter is roughly the same as during the first quarter of this year.
Google’s revenue gets its revenue solely from text ads that appear next to internet search results and on thousands or partner websites. Ross said the company’s growth does not indicate the health of the overall advertising market. It only indicates the level of online spending in critical areas of the economy like retail, automotive and travel.
