Google CEO: Worst of Recession 'Behind Us'

Sees Bright Spots in Auto, Insurance, Android and YouTube

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NEW YORK (AdAge.com) -- Google reported a 27% increase in profit in the third quarter, signaling the beginning of a recovery in the search-advertising market. And CEO Eric Schmidt sounded almost emphatic about the worst of the economic downturn being over.

Eric Schmidt
Eric Schmidt Credit: AP
"While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us," said CEO Eric Schmidt. The search engine turned in $1.64 billion in net profit compared to $1.29 billion a year ago. Revenue was $5.94 billion, a 7% increase over the same period last year.

Because it is bought in near real-time, search advertising is considered a good real-time proxy for marketer sentiment. The impact of search spending is also extremely measurable; cautious marketers that believe the market hit bottom earlier this year are slowly increasing their search spending as they return to the market.

"This is part of the recovery," said Bryan Wiener, CEO of digital agency 360i. "Money was sitting on the sidelines because marketers didn't know how bad it was going to get. Now that they've seen the bottom they're deploying more dollars to get top-line growth."

For Google, the improved performance signals a return to hiring, more acquisitions and investments, and, as Schmidt said, a stronger confidence on Google's core mission to organize the world's information and "serve our customers."

Auto was, by far, Google's most well-performing vertical category in the third quarter, largely on the back of the government's "Cash for Clunkers" program. But Nikesh Arora, Google's president of global sales operations and business development, said he still believes U.S. auto spending is poised for growth even now that that program has ended, largely because of the age of U.S. fleet and the shift of dollars to the web. Another strength? Health insurance, Mr. Arora said. Insurance generally is "primarily positive."

The retail vertical benefited from back to school spending but travel and finance were both slower, the latter partly because it's being compared to third quarter 2008, a period when search queries in the category skyrocketed thanks to the financial crisis.

Google Chief Financial Officer Patrick Pichette said YouTube profitability is coming in the "not-too-distant future." The company also said it is monetizing more than a billion video views every week on YouTube and about 90% of YouTube homepage inventory sold out in third quarter.

The company believes one particular bright spot in the near future is Android, Google's platform for mobile plans.

"Android's adoption is literally about to explode," Mr. Schmidt said. "You've got all the right conditions -- you've got the vendors, the distribution and so forth." He said the development of its other operating system, Chrome, which is for PCs, is on track.

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Abbey Klaassen contributed to this report.

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