Google appears to be confirming – at least unofficially - Wall Street’s fear that its advertising is not recession-proof after all. This is Tim Armstrong, head of advertising in the US, when asked at a Bear Stearns conference today how search advertising performs in an economic slowdown:
“It does reflect the macroeconomic environment… From a macroeconomic viewpoint, people do search what’s on their mind and what they’re thinking about” (Translation: if they’re tightening their belts, they’ll probably do fewer searches for the latest hot gadgets.)
Armstrong was careful not to issue a forecast about the current quater, and he did point out that the secular shift of advertising to the Web will still benefit Google. Still, any hint like this is guaranteed to be seized on given the current state of the market. Google’s stock is down nearly 5 per cent again today. That’s a 40 per cent fall this year, double the decline seen at Microsoft, which has had the weight of the Yahoo offer to contend with.
How ironic that Microsoft, desperate not to get left out of the internet advertising game, should see the timing of its bid benefit from fears of a cyclical decline in advertising. Where would Yahoo’s stock be now without the backstop provided courtesy of Microsoft’s resilient desktop-software business?
