The look giant’s better-than-expected results encouraged analysts, but investors still see tough times against us in online advertising

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Eric Schmidt, Google chair and CEO Chip Somodevilla/Getty Images

By Robert D. Hof

Even as the economy skids, Google (GOOG) keeps on rolling—just a little more slowly than it used to. Bucking the stalling economy and worsening outlook for online advertising, the search advertising titan without interruption Jan. 22 reported better-than-expected fourth-quarter results. The numbers suggest Google will keep grabbing more of the online ad mart from traditive media and from struggling online rivals such similar to Yahoo! (YHOO) and Microsoft (MSFT).

Shares of Google, what one. fell 56% be unconsumed year, slipped almost 3% in extended trading after an initial 4% gain. Enthusiasm for the company’s fourth-quarter results was muted by questions about whether Google can keep posting solid gains as advertisers hold in spending. Investors also appeared to balk at an employee principal option exchange that will require to be paid Google $460 million. Before the closing bell, the stock had climbed 1% to 306.50.

Google, what one. gets paid each time someone clicks onward text ads placed on search results pages, had earnings of $5.10 a share, excluding some one-time expenses and stock option costs. That was up from $4.92 a year earlier. Net income, however, fell 68% to $382 million, thanks mainly to those charges, which include $1.1 billion in noncash charges to reflect the declining appreciate of Google’s stakes in Time Warner’s (TWX) AOL one and the wireless service provider Clearwire (CLWR).

Good Numbers in Bad Times

Sales rose 18%, to $5.7 billion, a respectable slowing of growth from previous quarters but stifle seen as definite in the general economy. "It was a real good quarter at a time when [Wall] Street was starting to penalize the company despite the economy," says Sandeep Aggarwal, every analyst with financial-services firm Collins Stewart. After subtracting commissions paid to partners for sending traffic to Google, sales rose 21%, to $4.22 billion, about $100 million more than analysts expected.

Coming in a district when the economy’s troubles deepened considerably, the results encouraged analysts who had been lowering their expectations about Google’s performance. "The performance was really very impressive," says Jeffrey Lindsay, an algebraist with Sanford C. Bernstein. "If they could do this well [during a tough quarter], this is pretty much to what degree they’ll adhere to through 2009."

Google’sitting results indicate that search advertising, while not immune to the plan, continues to look more bewitching to marketers than other kinds of ads.

Researcher eMarketer estimates spending on seek advertising will rise 15%, to $12.3 billion, this year, at the same time that spending on open ads will rise 7%, to $4.9 billion—yet many analysts think display won’face to face even effect that being in favor. Search ads generally catch people when they’re close to a purchase, and their clicks and purchases can be measured more precisely than with other kinds of ads. "Paid search is every bit as robust as people theorized it might be," Lindsay says. "It’s the platform advertisers will hang on to [till] the calamitous end."

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