Solid Google Earnings Soothe Wall Street Jitters

Web-Services Sector Had Been Holding Its Breath

By Robert Marich -- Broadcasting & Cable, 4/17/2008 5:50:00 PM

The Web-services sector -- and perhaps the U.S. economy generally -- dodged a bullet when Google reported solid first-quarter earnings late Thursday, allaying fears of a slowdown in its search ad business that would drag down its earnings.

Google posted earnings of $1.31 billion, or $4.12 per share, compared with $1 billion ($3.18) one year earlier. That per-share figure was in line with optimistic analyst forecasts. Gross revenue climbed 42% to $5.19 billion. When excluding commissions paid to partners, revenue advanced 46% to $3.7 billion.

Google said its paid-ad clicks rose 20% globally and translated into even better earnings because those clicks were more productive than in the past.

Wall Street held its breath prior to the earnings announcement because ComScore counted just a 1.8% increase in first-quarter U.S. consumer clicks on Google search ads (excluding international activity). Google search metrics, plus indications that advertising on social Web sites at other companies was falling short of expectations, left investors to wonder if a slowdown was at hand in the booming Web-services sector -- a star of the lagging media sector.

Google’s stock-market capitalization stood at $141 billion at the close of trading Thursday, down $77 billion since the start of the year because of concern about search metrics and Google not yet creating a hit business outside of its search stronghold.