Recession Shmecession!

Last week Google reported Q1 earnings that surpassed analysts’ expectations sending the stock soaring 20% in the largest one-day gain since its IPO.

Many industry pundits had speculated that Google would report less-than-stellar results after comScore indicated that paid search clicks were down year-over-year, sparking fears that a recession was hurting performance.

As I mentioned in a previous blog post, a recession is unlikely to cause people to click less on ads -- maybe buy less, but not click less -- especially once they’ve already initiated a query. Furthermore, I observed that the decrease in paid clicks was likely due to continued rollout of Universal SERPs.

I recently came across a Forbes article from last month that does a good job articulating the impact a recession will have (is having?) on search.

“In good times, when consumers feel cash-rich and time-poor, they can afford to be less diligent about their spending. But as economic pressures mount, sentiment changes. People feel cash-poor and are more willing to invest time and effort in getting the best deal.

What sets the current recession apart is that, for the first time, consumers have a tool that empowers them to subject everyday buying decisions to the kind of scrutiny formerly reserved for big-ticket items and large business-to-business transactions.”

In other words, in recessionary times, people are more prone to search and click as they research ways to best spend their limited discretionary funds.

Google’s Q1 results certainly reflect this trend. In the earnings call, CFO George Reyes reported paid clicks were up 20% year-over-year and 4% quarter-over-quarter -- which is particularly impressive given that Q4 typically spikes for holiday shopping.

Bottom line? It’s clear that search is indeed impacted by macroeconomic factors -- perhaps, just not in the negative way that everyone thought.

Posted by: Aaron Goldman, VP Marketing & Strategic Partnerships


Dave McAnally said...

Coincidentally, Omnicom reported its Q1 earnings had a good first quarter too and even though it's down from a high just before noon (posting this at 12:45)

Copyright © 2008 Resolution Media, Inc. All rights reserved.