Google results showed no significant change to recent trends. Clicks were fine, costs are under tight control and they maintain their dominant position in internet search.
Away from the day to day gyration of will they or won’t they make the quarter and how much the stock will move on it, it’s worth noting that revenue dropped on a sequential basis for the first time in the company’s history. Their top line growth rate is slowing substantially. Analysts have this modeled as a blip – revenue will rise sequentially for the next year, according to estimates – that seems highly unlikely.
Internet search should be counter-cyclical – its a no-cost activity and lower consumer spending should have a positive and not negative effect. Fact is, when Google says the economy is impacting them, it’s not particularly true. Their sheer size is what is impacting them. Google has tried to find ancillary businesses to layer on and none have caught in the ways they have hoped. While YouTube is a pageview bonanza, it’s not a significant revenue generator. Their efforts in social networking have been meager and mostly unsuccessful. It is unclear where their next big wave of expansion will be.
Despite their leadership position, they are not invulnerable to multiple contraction due to their slowing growth rate. Fact is, the only thing keeping the stock up here are the expanding margins. It will be difficult for the company to show more gains on the expense control front without sacrificing further top line growth.
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