Google, online behemoth, will report its first quarter results on Thursday (April 16).
In the next few days, Yahoo! Inc. (NASDAQ GS:YHOO) and Microsoft Corp. (NASDAQ GS:MSFT) will report first quarter of 2009 (Q1-2009) results. So, Google Inc. (NASDAQ GS:GOOG)'s results should offer glimpses of how well search advertising businesses and other internet related media business performed in Q1-2009.
In Q4-2008, Google's earnings per share ($5.1) exceeded the analysts' consensus estimate ($4.95) by 3%. However, in the current quarter the company may not report such earnings as it had announced two rounds of first ever layoffs, eliminating roughly 300 full time positions in sales, marketing and recruiting.
Analysts expect Google to report revenue in the range of $3.89 billion to $$4.31 billion. Downward revision in the company's earnings has been gradual but substantial. At the end of Q4-2008, analysts expected Google to report earnings per share of $5.08. A week ago, this was revised down to $4.98. However, Google may miss this recent estimate as well. However, the company is more likely than not to exceed its first quarter earnings in a year ago period.
Google is almost totally reliant on its advertising sales for revenue--the sector accounted for more than 95% of 2008 revenue. The company uses its core search technology capabilities to place ads on its eponymous search engine as well as through a network of third-party websites. What distinguishes Google's "paid search" advertising business is that it is performance-based (advertisers only pay when someone clicks) and ads are contextual (e.g., a Blackberry ad typically shows up when someone searches for "Blackberry"). Google's dominance in paid search ads is so high that it commands more than half of all global paid search ads.
Internet advertising is the fastest growing segment of the advertising market, but still only represents around 7%-9% of total U.S. advertising dollars -- so there is room for further growth. In order to tap these opportunities, Google has used the profits from its paid search business to expand in many different directions related to advertising. Google along with its other paid search ad peers is seen to have experienced a tough first quarter in 2009 due to global recession which generally slashed advertisement budgets.
Prior to the downturn, Google's focus had been on winning the number of advertisements presented alongside searches, in an effort to elevate quality over quantity.
