Economic Slump Affects Google UK
The economic downturn has not only affected real businesses and consumers but also several online players across the world. One such example is Google UK, whose turnover plunged in the second quarter, its first ever dip since it started reporting as a public company in 2004.
A sharp decline in expenditure by estate agents along with other property advertisers caused revenues slide down to £392.4 million between April and June (Q2) – against the record £405.9 million generated during the first quarter.
The company’s chief economist, Hal Varian reasoned the crisis in the housing market as the principal source of weakness. Though he did not provide a comparison between the two quarters, the property downturn amid growing revenues from UK search advertising was all the more significant. In fact the UK search advertising performed so well that it saw an increase of 29.8% overall in comparison with the same time last year. Even then, Google’s performance on the online front remains much more ahead of traditional media, with Trinity Mirror signifying that its newspaper advertising declined by 12.6% in May and June, and ITV1 bookings for the month of September falling by 13%.
The quarterly setback is an indication that the search major is unable to confront the existing economic environment.
Dan Calladine, research director with digital advertising agency Isobar, said that the search advertisers are essentially looking to establish a direct relationship with consumers, such as travel companies and banks, who can help selling you products devoid of moving away from their desks. However, they are not immune to macroeconomic trends.
Google, though, stated that the slump reflected a seasonally weaker second quarter, which earlier had been masked by the firm’s success in capturing market share from rival Yahoo!
According to Hitwise, Google had a share of 87% of the UK online search market in May, while Yahoo (4%) had slightly more than that of Microsoft’s MSN search.
The senior VP for product management, Jonathan Rosenberg said that the company has a very high share in the UK market, and as it kept on growing since the past few quarters, it has managed to mask the seasonality in the business. Google states that use of its search engine, and thus advertising opportunities, escalate sharply when the academic year comes to an end.
In comparison to £302.2 million in Q2 of 2007, Google’s revenues from UK grew only by £6.5 million, the slowest rate of sequential quarterly growth in the year. UK is a huge market for Google, being the second-biggest source of revenues throughout the world, and accounts for $1 in seven that the search leader makes.
