GOOGLE ANNOUNCES SECOND QUARTER 2009 RESULTS
Google Inc. (NASDAQ: GOOG) today announced financial results for the quarter ended June 30, 2009. — “Google had a very good quarter, especially given the continued macro-economic downturn. While most of the world's largest economies shrank …
Context & Ripple Effects
This is the second read on Google's year through the downturn: April's first-quarter 2009 report set the question, and today's numbers answer part of it. VentureBeat calls the print an expectations beat "by a nose," while Search Engine Land frames the $5.5 billion quarter as evidence Google has "stabilized" after the contraction that followed the boom years captured in the fiscal 2007 annual results.
The wider significance is what the number is being asked to stand for: within the trade press, Google's quarterly earnings are treated as the proxy for whether the online ad market is genuinely recovering or merely pausing its decline. The result also lands mid-product-push — the Chrome OS announcement and the Docs redesign were both confirmed this month, so the print arrives while Google is funding new bets off the core search business.
First-order effects
- Google exits the worst of the macro contraction with a quarter management itself labels "very good," giving the company near-term cover to keep investing in Chrome OS and the Docs interface rather than retrenching.
- Advertisers and media buyers get their cleanest signal yet that search spending has stopped shrinking, since Google's revenue line is the sector's most-watched indicator.
Second-order effects
- If the stabilization holds into the next quarter's print, competitors in paid search face a rival whose cash engine is re-accelerating just as it expands beyond search with an operating system play.
- The narrowness of the beat tempers any rally narrative: a nose-ahead quarter suggests advertisers are resuming spend cautiously rather than returning to pre-downturn budgets.
Third-order effects
- Quarterly search-advertising results are hardening into a de facto macroeconomic indicator — investors now price the health of consumer and business spending partly off one company's ad revenue.
- A stabilized core funds diversification at exactly the moment Google pushes into operating systems and cloud-hosted applications, shifting the company's risk profile from single-product dependence toward platform competition with incumbent software vendors.
The trend: Search advertising is consolidating its role as the economy's real-time barometer, with each of Google's quarterly prints doubling as the market's verdict on the ad-recovery cycle.