/ 18 April 2008

Google makes gains during credit crunch

The internet company Google has defied predictions of economic doom by delivering a 31% surge in quarterly profits, which appeared to vindicate the company’s claims that people will continue searching the web in a recession.

Google’s first-quarter earnings jumped from $1-billion to $1,31-billion and the company revealed healthy growth in the number of ”paid clicks” on its advertisements.

Its shares, which have slumped by more than one-third in recent months on fears of a slowdown, leapt by 17% to $524 in unofficial after-hours trading.

Google’s chief executive, Eric Schmidt, said the firm was suffering no ill effects from the credit crunch. ”We’ve looked at this really carefully and we do not see an impact at this time.”

He said there had been ”internal conversations” on what might happen if a slowdown in advertising expenditure were to occur, but that Google had concluded it would emerge relatively unscathed. ”Our conclusion is that we’re well positioned if the economics change because our model is so targeted — and targeted advertisements do well in most circumstances.”

An influential research firm, Comscore, recently published estimates suggesting that growth had slowed in crucial paid clicks — the number of people alighting on advertisements on Google’s website.

But Google’s official figures showed that first-quarter clicks were up 20% year-on-year and were 4% higher than in the final quarter of 2007.”Our paid click growth is much higher than has been suggested by third parties,” said Schmidt.

Google’s earnings easily outstripped Wall Street forecasts and won praise from analysts.

”It’s a good time to be a Google bull,” said Colin Gillis of stockbroker Canaccord Adams. ”The boys delivered.”

Google’s apparent robustness lifted spirits across the technology industry. The company is considered a bellwether for online fortunes, and shares in eBay, Amazon and Yahoo! all rose sharply in after-hours trading.

Among Google’s recent initiatives have been newly tailored websites to suit overseas markets, including a special Japanese home page. The firm has improved the local flavour of search results in individual countries, demoting websites from further afield.

A new capability to embed advertisements within videos has improved returns from YouTube, which Google bought two years ago. YouTube continues to grow at a remarkable speed, with 10 hours of new video uploaded every minute.

In Britain, an upturn in travel and finance advertising fuelled a revival in Google’s United Kingdom revenue, which rose to $803-million, amounting to 15% of the company’s global income.

Google recently struck a deal allowing its rival Yahoo! to test its advertising software, as part of the smaller company’s efforts to fend off a hostile takeover by Microsoft.

Schmidt declined to say how he viewed Microsoft’s offer for Yahoo! except to say: ”It’s nice to be working with Yahoo! — we like them very much.” — guardian.co.uk Â