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Google money machine records Q1 choking sound

Five-year revenue streak finished

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The recession has finally gummed-up the dial on Google's top secret money machine even though the search firm is still doing better than most other advertising-dependent companies.

Google's first-quarter earnings showed the slowest revenue growth year-over-year since the company went public in 2004 - but it was growth none-the-less. The Mountain-View chocolate factory's chief exec Eric Schmidt called it a "good" quarter given the depth of the recession, saying the results show the resilience of their business model and ongoing potential of the web as advertisers shift their cash online.

Income for the quarter ended March 31, 2009 was $1.42bn, up from $1.31bn a year earlier. Profits were boosted largely by cutting research and marketing costs, eliminating jobs, and shuttering its newspaper and radio ad units.

Earlier this year, Google shut down a number of small projects and laid off about 340 employees representing about two per cent of its total workforce. While the cuts were relatively small, it was the company's first significant round of layoffs outside of job cuts following an acquisition.

Revenue for the first three months of the year - traditionally a slow quarter for online advertising - was $5.51bn. That figure is an increase of six per cent compared to the same period last year, but also the first-ever decline between two consecutive quarters.

Adsense revenue was $1.64bn (about 30 per cent of sales in Q1), down about three per cent from a year ago. Google-owned sites pulled in revenues of $3.70bn (about 67 per cent of total revenues), a nine per cent increase year-over-year.

Despite a slump in global advertisement spending, Google said paid clicks on its text-based search ads rose 17 per cent from a year earlier. Google's usual strategy when times are tough is to simply push more ads onto its search pages. And more ads means more clicks and therefore, more revenue.

Earnings outside the US totaled $2.88bn, representing about 52 per cent of total revenues in Q1. The UK alone represented 13 per cent of the company's total.

It was announced during the results call that London-based executive Nikesh Arora, who's been helming the company's international business, will become Google's new head of global sales in the place of Omid Kordestani. Kordestani will become a senior advisor to the office of the CEO and founders.

Despite cutting back on some expenses, Schmidt said Google will continue to heavily invest in markets it thinks will eventually mature.

"Going forward, our priority remains investing for the long term to drive future growth in our core and emerging businesses," he said. ®

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