Google surprised analysts on Thursday with stronger-than-expected third quarter earnings. Net revenue rose 7 percent from a year earlier, to $5.94 billion, while profits surged 27 percent, to $1.6 billion.
For anyone concerned with the future of journalism, the most interesting underlying factor behind Google's renewed vigor had to do with the health of the online advertising market.
From the Wall Street Journal (italics mine):
The Mountain View, Calif., company's financial state suggests that online advertising, which has weathered the recession better than many other advertising sectors, could be one of the first areas to recover.
Revenue from U.S. Internet advertising fell 5.3 percent in the first half of 2009 compared with the same period in 2008, according to the Interactive Advertising Bureau, but some analysts forecast it will start growing again later this year.
Advertising budgets are always one of the first things to collapse when a recession hits; a key reason why advertising-dependent media companies are especially sensitive to the onset of economic downturns. But the fact that online advertising has been performing relatively better than other sectors during this recession makes sense, given the massive shift of attention and eyeballs from traditional forms of media to the Internet.
When the economy recovers, the shift of advertising dollars to the Internet, following those eyeballs, is bound to continue, with more force than ever. Google's ready, but it's not clear that the media business is. Lately, we've been hearing a great many old-school media company executives bemoaning what the Web has done to their business models, but in the near future, if you are not successful on the Web, you won't have a business model, period.
Shares