Google GOOG: Economic Downturn Hits Search Engine Hard in Q1

by Tina Kells | April 16, 2009 at 04:01 pm

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Google is the Internet but hits to profitability during Q1 may see the search engine feeling pain for months to come. Google Inc (GOOG) Chief Financial Officer Patrick Pichette expressed confidence in the Google business model but warned that there were significant decreases in core operating income.

Google is clearly not immune to the pain of economic downturn as the stock has lost more than half it's value over the past 52 weeks. After the Q1 report was released stock in the Internet giant closed down an $387.45 per GOOG share.

Google announced plans to expand acquistions and further monetize the YouTube brand to maintain profitability and mitigate losses in search engine advertising sales. YouTube announced an important partnership with Universal that will likely see significant profits for both partners.

Google Inc. (GOOG) Chief Executive Eric Schmidt said video sharing unit YouTube was "making very good progress" in signing content deals with small, medium and large content providers.

Schmidt noted, as an example, that YouTube had recently struck a deal with Universal music.

"We're beyond excited about (it) because it really redefines the business model between content owners and companies like Google," he said during an analyst call after the company reported first-quarter results.

He added that the company will focus on monetizing the video site through advertising.

Omid Kordestani, who will assume the role of special adviser to Schmidt, said there was "great advertiser interest" in YouTube.