January 22, 2009

MOUNTAIN VIEW, Calif. - After a decade of mostly feel-good stories, Internet search leader Google Inc. is expected to join in the economy's tale of woe with its fourth-quarter earnings report and commentary about the state of the online ad market.

The results, due out after the stock market closes Thursday, will likely reflect the slowest growth since Google went public in 2004, and help explain why management has been pulling a variety of financial levers to boost profits.

Among other things, Google has dumped little-used products, accepted once-forbidden ads for alcohol, opened up once commercial-free sections of its Web site and even laid off a smattering of employees from a work force accustomed to red-carpet treatment.

And this from a company that remains in a far better spot than most businesses because Google remains the dominant force in Internet advertising — a marketing vehicle that is still attracting more spending despite the deepening recession.

But Internet ad growth is expected to fall below 10 percent this year after ranging between 20 percent and 45 percent during the previous four years. The deceleration is the main reason Google is pinching pennies and analysts are trimming their revenue projections, contributing to a sharp decline in the company's stock price.

Google shares finished Wednesday at $303.08, a 48 percent drop from just a year ago when the stock price was still hovering near $600 and management was downplaying the notion that economic turbulence would jar its moneymaking machine.

Analysts surveyed by Thomson Reuters expect Google to earn $4.95 per share on revenue of $4.12 billion. Those figures exclude Google's expenses for employee stock compensation and commissions paid to its ad partners.

But analysts are forced to guess more than usual with their Google estimates because the Mountain View, Calif.-based company's refuses to provide any guidance.

While that policy isn't changing, Google seems willing to provide more direction than it has in the past. For the first time, Google has scheduled an investor session hosted by its chief financial officer, Patrick Pichette, and top product executive, Jonathan Rosenberg, after its normal conference call with securities analysts concludes.