Google’s earnings are a ‘bad omen’ for digital ad industry
Google’s earnings report showed an advertising revenue decline of 1.8 billion in the first quarter of 2012. The company’s total revenue fell by 10 percent to about $10.5 billion. At that point, the company had $4.4 billion in cash on hand.
Google has been talking a lot about growth in a year marked by a lot of it, as it expanded the scope of services it now offers, including Android and YouTube.
The company’s earnings report shows the company’s first quarter revenue has declined.
Google’s revenues fell 1.8 percent to about $10.5 billion for the quarter ended March 29, compared with the same quarter one year ago.
The company’s earnings declined to $3.35 billion. Google’s stock price ended Tuesday’s session with $7.44, versus its 52-week low of $5.25 set last March 6.
At that point, Google had $4.4 billion in cash on hand. That’s down from the $7.9 billion in cash Google had on April 13, 2011, at the peak of its stock market bubble.
Google is also facing a lawsuit from several competitors. In early April, a federal jury found Google had infringed on YouTube’s copyrights. As a result, Google could face billions of dollars in damages to settle the copyright infringement lawsuit.
This is a bad omen for the digital advertising industry. As we’ve written before, advertising is not profitable on its own. It’s profitable only when people buy stuff with their online purchases. And then, when someone buys stuff with an online purchase, people use adwords and display ads.
The advertising industry will suffer if Google’s advertising business implodes or just barely makes a profit. That will force Google to be much more careful with its money and much more cautious about what happens in advertising. It will have to spend more on developing products rather than on trying to take people’s money by selling them stuff with Google.com or Google apps or Google AdSense ads.
There’s one bright spot from Google’s