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Ahead Of Earnings Call, Google Faces Tough Climate

Will GOOG rise to analyst expectations?

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Google is set to release its Q4 2008 earnings report tomorrow, and the company will likely set the tone for the entire search marketing industry and the online economy going into 2009. According to a recent market report, Google’s got a tough sell on Thursday.
Ahead Of Earnings Call, Google Faces Tough Climate
Efficient Frontier released its quarterly paid search analysis this week, based on a portion of client activity amassing 92 billion impressions and 600 million clicks. The good news of the report is that Google maintained a stronghold on the search ad-buying market, grabbing 76 percent of business.

In addition to that, the retail sector saw an increase of nine percent in spending year over year. Despite grabbing up to 72 percent of the searching populace, that’s pretty much the end of the good news.

Small advertisers are spending less on search ads than larger brands, causing eMarketer to project a search advertising growth rate of just under 15 percent in 2009, compared to 2008’s 21 percent growth rate. Advertisers spending less than $50,000 on search ads cut spending by 23 percent last quarter, and those spending over $200,000 cut their budgets by nine percent.

Automotive, finance, travel and entertainment sectors all cut search ad spending by 15, 20, and 24 percent respectively, thanks to less consumer demand. Travel and entertainment saw an 18 percent decline in website traffic as consumers tighten their belts.

There’s still hope for Google’s bottom line. In addition to increased share on both sides of the search engine—among searchers and advertisers—analysts have been lowering their expectations while still predicting revenue growth in the double digits.

There’s also hope in the economic philosophy that a recession is the worst time to cut one’s advertising budget. Advertisers looking to gain new customers might find now is the best time to be aggressive. Not only are competitors cutting their marketing budgets and thereby decreasing their exposure to potential business, new, out-of-sector competition pops up vying for depleted discretionary spending cash.

In short, when times are bad, businesses probably should invest in grabbing more customers, not fewer. 
 

Ahead Of Earnings Call, Google Faces Tough Climate
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