Google Q1 Revs $5.5 billion, Down 3 Percent Vs. Q4

Although revenues grew 6 percent compared with Q1 2008, Google suffered its first quarter-over-quarter decline (3 percent), as it announced Q1 revenues this afternoon. From the press release:

Revenues – Google reported revenues of $5.51 billion in the first quarter of 2009, representing a 6% increase over first quarter 2008 revenues of $5.19 billion and a 3% decrease from fourth quarter 2008 revenues of $5.70 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

Google Sites Revenues – Google-owned sites generated revenues of $3.70 billion, or 67% of total revenues, in the first quarter of 2009. This represents a 9% increase over first quarter 2008 revenues of $3.40 billion and a 3% decrease from fourth quarter 2008 revenues of $3.81 billion.

Google Network Revenues – Google’s partner sites generated revenues, through AdSense programs, of $1.64 billion, or 30% of total revenues, in the first quarter of 2009. This represents a 3% decrease from first quarter 2008 network revenues of $1.69 billion and a 3% decrease from fourth quarter 2008 network revenues of $1.69 billion.

International Revenues – Revenues from outside of the United States totaled $2.88 billion, representing 52% of total revenues in the first quarter of 2009, compared to 51% in the first quarter of 2008 and 50% in the fourth quarter of 2008. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the fourth quarter of 2008 through the first quarter of 2009, our revenues in the first quarter of 2009 would have been $120 million higher. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the first quarter of 2008 through the first quarter of 2009, our revenues in the first quarter of 2009 would have been $429 million higher.

Revenues from the United Kingdom totaled $733 million, representing 13% of revenue in the first quarter of 2009, compared to 15% in the first quarter of 2008 and 12% in the fourth quarter of 2008.

In the first quarter of 2009, we recognized a benefit of $154 million to revenue through our foreign exchange risk management program.

Eric Schmidt stressed that in the context of economic “headwinds” and a very difficult and uncertain environment, Google did well and displayed “resiliency.” But he cautioned that Q2 and Q3 would see likely “seasonality” in terms of demand and search revenues. Schmidt also announced that Omid Kordestani, Senior Vice President, Global Sales, was taking on a different role and his current responsibilities would be assumed by Nikesh Arora, President, International Operations.

Here are some slides from the presentation associated with the earning call:

SVP Jonathan Rosenberg followed lengthy remarks by CFO Patrick Pichette, who said, among other things, that Google continues to “fully fund” strategic areas: “display, apps and mobile.” Rosenberg spoke about Google’s desire to help advertisers “max” out their daily budgets. Along those lines, Google was investing in improved advertiser tools (e.g., conversion optimizer) to help automate and make it simpler to manage large scale campaigns. He referenced the new AdWords “front end” as a major upgrade accordingly.

He added that Google was going to focus more on display advertising. Google was going to try to overcome some of the fragmentation in the online display market. Google wants to “turn a complex process into something simpler.” He added, “We want to make display as relevant to users as search is,” which was followed by a mention of Interest-based ads as instrumental in that process.

Rosenberg ended his remarks with a discussion of the mobile market: “It’s a great platform for very compelling applications” (e.g., Latitude). He observed that “over 8 percent of mobile browsing is conducted via Android phones, second only to the iPhone.”

Omid Kordestani who participated in the Q&A portion of the call said that small business advertisers largely maintained their spending while some of the larger advertisers reduced their spend or were more cautious in their spending during the quarter.

There was a question about display advertising and Interest-based display advertising (BT). Rosenberg said it was too early to comment on performance of the program but said that it will run on the Content Network and YouTube.

Eric Schmidt referenced the recent YouTube-Universal (Vevo) deal as noteworthy: “We’re beyond excited about it.” Schmidt added that micropayments would probably make their way into YouTube in the future. He also said that YouTube would benefit from “very very targeted display ad models that we’re building now.”

There was a question regarding CTRs on mobile relative to traditional search. Rosenberg said that he didn’t have the data but that more advertisers were choosing to run their ads in mobile.

Asked about Google’s cash balance, Schmidt said that for the foreseeable future Google would remain “very conservative,” implying no acquisitions (i.e., Twitter) in the near term. In response to a question about Android he said that “Android is going to have a very strong year. There are announcements happening between now and the end of the year that are quite significant with operators and hardware manufacturers.” He sees netbooks and other similar devices as a very promising area for future Android development.

An analyst finally asked about Twitter and monetizing its traffic. Schmidt responded: “Twitter proves innovation is alive and well in Silicon Valley . . . As a channel for real-time information you could hang ads on that. It would be something that we’d be happy to pursue with them as well as the other players in the [real-time] space.”