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Google's Cost-Per-Click Decline

22 Jul, 2009 Response This Week

MOUNTAIN VIEW, Calif. – Though Google’s year-to-year revenue has increased, it looks like the financial downturn is now affecting the search powerhouse, as its cost-per-click dropped 13 percent from the second quarter of 2008.

The average cost-per-click includes clicks related to ads served on Google sites as well as its AdSense partner sites.

Despite this decrease, the company earned $5.52 billion in revenues during second-quarter 2009, a 3-percent increase compared with the same period in 2008. “These results highlight the enduring strength of our business model and our responsible efforts to manage expenses in a way that puts us in a good position for the economic upturn, when it occurs,” says Eric Schmidt, CEO of Google.

Yet the decline in cost-per-click revenues “show that Web users are clicking on ads to comparison-shop without buying products, and buying lower-cost items online compared with a year ago” says Jeffrey Lindsay, a senior analyst at Sanford C. Bernstein.

Google’s paid clicks were up 15 percent compared to second-quarter 2008 and its net income was $1.48 billion, an increase of 19 percent vs. the same period last year. “Google’s business appears to have stabilized,” says Schmidt. “A quarter ago, we had no idea where the bottom was.”

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