Google Inc, owner of the world’s most popular search engine, reported slower profit and sales growth in the first quarter as the recession discouraged users from clicking on ads.
Net income climbed 8.9% to $1.42 billion, or $4.49 a share, the company said on Thursday. Excluding revenue passed on to partner sites, sales were $4.07 billion.
The slump in advertising spending led to Google’s first sequential drop in quarterly sales since it went public in 2004. The company is now cutting research, marketing and side projects to cope with the economy, which shrank 6.3% last quarter.
"We’re still basically in uncharted territory," chief executive officer Eric Schmidt said. "The current economic environment, which everybody is all very, very familiar with, remains tough."
The recession is changing the way consumers behave online, Patrick Pichette, chief financial officer, said.
"In this economy, they’re just doing more window and comparison shopping," he said. "They’re also purchasing lower- priced goods. But they’re buying — maybe buying less, maybe different things." That means Google still has a role, Pichette said. People are using the search engine to find coupons and bargains online, he said. Queries on health and autos also fared well during the quarter.
Excluding costs such as stock-based compensation, earnings were $5.16 a share last quarter, compared with the $4.95 estimated by analysts. Net income was $1.31 billion, or $4.12 a share, a year earlier. While sales rose 6.2%, Google’s total expenses were little changed from last year, at $3.63 billion.
"Technology and the internet continue to be a space where advertisers are continuing to invest," Darren Chervitz, a fund manager at Jacobs Asset Management in New York, said. "The fact that they’re growing at all is pretty impressive."
Google also announced that its head of global sales, Omid Kordestani, will become a senior adviser to the CEO and Google’s founders. Nikesh Arora will take over Kordestani’s old job.