The Horror: Google Blows the Quarter

My colleague Rob Hof just published a good post about Google’s miss. His bottom line: It’s a miss but not a huge miss. Still, investors, who expect the world from Google, are none too pleased. GOOG is down 8% in after-hours trading to $492.

Here’s a snippet from his post riffing on the conference call:

CEO Eric Schmidt says he’s “obviously very pleased with what we believe are very good results” in a normally slow quarter and in a tough economic environment.

Outgoing CFO George Reyes says paid clicks were up 19%, a sharp slowdown, which he continued to attribute to quality improvements—that is, placing fewer ads on sites with little useful content. Capital spending was at $698 million, certainly not a small number and spending that Reyes implies will continue apace.

Economist Hal Varian acknowledges weakness in a lot of sectors, but says query growth is positive in every sector, even those like autos and real estate you’d expect to be down. Revenue growth is also up from a year ago in all sectors except real estate, which he said was down only slightly. He didn’t say how much query or revenue growth was up.

Now, to some of the analysts’ questions:

Brian Pitts of BofA asks about ad coverage. Jonathan Rosenberg, senior vice-president of product management, says he sees little change in Google’s efforts to improve ad quality by showing fewer but more relevant ads on pages. But cofounder and president of products Sergey Brin says “perhaps we were a little overly aggressive in decreasing coverage in this quarter,” so that could change a bit. That certainly could help results next quarter and beyond, and may please investors always looking for scraps of visibility on Google’s outlook.

Justin Post at Merrill Lynch asks about the impact of the economy. Schmidt: “We continue to believe that we’re positioned very very well … because of a flight to quality and to performance.” Varian adds: “We have a little bit of the Wal-Mart effect: people are watching their dollars and therefore shopping more.”

Check out the full post here.

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