Google set to weather the storm‾

Google's CEO Eric Schmidt reckons his company is well positioned to weather the US' economic slowdown according to a Dow Jones report.

He was quoted saying, 'The kind of advertising we do is more measurable,' claiming that in bad times advertisers tend to shift to 'highly measured' advertising. He also said the firm's international operations offer a buffer in case of a US downturn; 'Even if there is a US recession, and especially if the US dollar gets weaker, we tend to benefit from currency effects'. He didn't provide data or forecasts for overseas revenue, but added that in a bid to boost its operations in China, Google plans to announce a redesigned local web site in the next couple of weeks, Schmidt said.

Google has been a distant second to local search leader Baidu.com in China.

These statement beg several questions. First of all most of the rest of the world is not debating whether the US is in recession so much as whether it should be described as a recession or depression, like the one that followed the Wall Street Crash of 1929.

Secondly Schmidt's comments on expanding operations in China while the Red Army is sealing Tibet's borders and the Chinese authorities are blocking YouTube (see story below) seem to be terrible timing, at best.

Thirdly though, questions remain and are likely to be accentuated now about Google's business model. On 28th February, Google's shares fell by 4.6% when ComScore's figures indicated a 40% year on year growth in the number of searches undertaken using Google in the US market, but this had not translated to a corresponding number of click-throughs. Instead clicks on Google adverts had fallen by 0.3% in January compared with the same month the previous year. Also, its fourth quarter earnings were down to 52% instead of the 55% predicted by the market.

True, there is a great deal of debate about what these figures mean. It is not known is how much advertisers pay per click, but fewer at a higher price is not necessarily a bad thing, and indeed Google has made the "˜clickable' area of its adverts smaller to cut down on the number of accidental clicks that cost advertisers money, but were of no value to them. Others argue that the fall in click-through rates is linked to the slump in consumer spending and confidence.

Whatever the case, it seems that what Google's co-founder Sergey Brin, told the Financial Times in January is more credible than Schmidt's claims: Brin said he did not know what to expect as the young company had not really gone through a recession before.

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