Call it a comeback? Google earnings due

by Tom Krazit


With the online ad business appearing to have collected itself at the bottom of the ravine, all eyes will be on Google's earnings report Thursday to see if it has figured out where the path back to the top starts.

Investors are feeling good about Google in the run-up to Thursday's third-quarter earnings conference call, sending the stock to a 52-week high on Tuesday at $527.46 before it settled back down to $526.11 at the close of trading. Five prominent financial analysts raised their expectations for Google's stock Monday amid a collective feeling that advertisers have started to finally increase their spending after sitting on their wallets for about a year.

Last week Google CEO Eric Schmidt said that not only are things picking up in the U.S., but Europe has started to get its groove back ahead of the expected timeline. Google sales representatives gathered in New York last week were said to be "very, very positive."

The other good thing for Google is that even if search growth in the U.S. continues to creep along--up just 3 percent from July to August--the worldwide growth in search queries is quite strong, giving the company some room to grow revenue. Revenue from outside the U.S. made up 53 percent of the company's second-quarter revenue, although competition is tougher for Google outside its home country, especially in fast-growing China.

Citigroup's Mark Mahaney, speaking to MarketWatch earlier this week, described search advertising as one of the more resilient forms of advertising during a slump, and as such is also one of the first places where companies will want to put their money as budgets loosen. That means Google's results--if the optimists win the day--will be held up as the start of the online advertising recovery as well as a sign that the rest of the industry still has a ways to go.

Longer term, however, Google needs to make something else pay off beyond its search juggernaut if it wants to sustain long-term growth, Mahaney said. Google has made some progress in the last quarter on some of those areas, launching a revamped display ad exchange (although that came too late in the quarter to have much of an effect), signing deals with several partners for Android phones, and increasing the number of ads and content partnerships shown on YouTube.

from CNet