Google shares slump after it warns on ad spending
Friday 18 July 2008
Google raised fears for the first time that the weakening economy could affect the heretofore soaring growth rate of online advertising spending. Eric Schmidt, the search engine giant's chief executive, warned last night that the company was facing "a more challenging economic environment", compound-ing investors' negative reaction to disappointing profit figures for the last three months.
Google shares fell more than 10 per cent in after-hours trading, as Wall Street digested Mr Schmidt's comments and equally disappointing results from Microsoft, which also rep-orted disappointing figures for its MSN internet business.
"It's hard to love the Google numbers," said Colin Gillis, analyst at Canaccord Adams. "There's the initial shock of this being the best company in the space and it just fell short."
Net income for the second quarter rose to $1.25bn from $925m in the same quarter last year, but analysts had expected more. Areas of weakness included lower margins, because of rising spending, and a smaller proportion of users clicking on the ads that run alongside Google's search results – the source of its income.
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