Google posts first quarter revenue drop

Google has posted its first sequential decline in the first quarter of 2009, despite revenues being up 6% year on year.

The search giant admitted that it is “feeling the impact” of the current recession and despite generating revenues of $5.51 billion in Q1, it suffered a 3% decline on Q4 2008.

Google’s AdSense initiative, which generates advertising revenue from third party sites, was down 3% on the previous quarter, contributing $1.64 billion (30%) to total revenues.

However, its UK operations were among the hardest hit, with revenues of $733 million representing 13% of total revenue in Q1 2009.

This compares to 15% in the first quarter of 2008 and 12% in the fourth quarter of 2008.

Google’s results also show that its commitment to expanding emerging businesses and international operations has increased – since Q1 2008 the company now generates around 52% of its revenues outside the US.

Google’s chief executive, Eric Schmidt, said it was “a good quarter” given the current economic circumstances, which underlines “the resilience” of the company’s business model “and the ongoing potential of the web as users and advertisers shift online”.

However, Schmidt admitted that the company could not escape from the advertising downturn: “We’re still basically in uncharted territory. Google is absolutely feeling the impact,” he said.

“Users are still searching but they’re buying less. Ultimately, what that really means is the ads are converting less.”

Google’s figures were in line with Wall Street’s expectations, with revenues down slightly from the previous quarter, but posting a modest gain on the same time last year.

Wall Street reacted positively to the news, with Google’s shares rising by around 5% in after-hours trading, although by the end of the session this fell back to a rise of just 0.5%.