Clicks may sound alarm for Google

Andrew Clark in New York
The Guardian,
Saturday March 29 2008

Google has suffered a second consecutive month of weak growth in advertising clicks, fuelling concern that the high-flying internet search specialist is suffering in the economic slowdown.

Statistics compiled by the research firm Comscore showed a 3% year-on-year rise during February in Google's "paid clicks" - the number of times users hit advertising links on its website. Although the number is an improvement on January's zero growth, it amounts to a sharp slowdown compared with monthly increases of between 25% and 40% last year.

Google maintains that the deceleration is a consequence of its strategy of focusing on quality. The Silicon Valley firm has been trying to eliminate accidental clicks and has been working with advertisers to make sure that links relate closely to users' search queries.

But the slowdown has contributed to a 36% slump in Google's shares since the beginning of the year and analysts are divided on whether the company's confidence is justified.

Scott Kessler, an equity analyst at Standard & Poor's in New York, said: "It's almost unfathomable that the company has not seen an impact from an economy that we believe is in the midst of a recession."

Others were more sanguine. Rob Sanderson, an analyst at American Technology Research, said the number of clicks is less important than Google's revenue, which is based on the clicks converted by advertisers into sales. "It's not clicks that advertisers are really buying."
Google's shares edged up in early trading on Nasdaq, reflecting relief that the numbers were no worse.