SearchBiz: The Economy Takes Its Toll On Google & Why Twitter Rejected Facebook’s Acquisition Overtures

The buzz today comes from the Wall Street Journal article, which you’ve probably already seen, called “Google Gears Down for Tougher Times.” In a related post, Silicon Alley Insider summarizes the piece with more than a hint of schadenfreude.

The thrust of the WSJ story is that Google is trying to cut costs and reduce spending, which means getting rid of contractors, curtailing 20 percent time projects, shuttering services without traction (e.g., Lively, Google Page Creator) and reducing perks. We’ve heard versions of this Google cost-cutting story over the past several weeks. All this comes amid financial analyst reports that are becoming more skeptical of Google’s ability to maintain growth in this recessionary environment, even if it’s doing a better job than almost everyone else. In particular Bank of America Securities analysts lowered estimates for Google based on perceptions of reduced commercial queries and global advertising weakness. According to Barron’s [BofA] slashed [its] Google [2009] revenue forecast to $17.47 billion, from $19.16 billion.

This year Google’s on pace for more than $21 billion in revenue, even with no growth over Q3. If BofA is correct about 2009, that would represent negative growth — obviously. Yet search is one area of relative online ad strength and online is considerably stronger than traditional media right now.

The balancing act for Google is to maintain its culture and employee morale, which is something of a challenge in a belt-tightening environment. The WSJ article quotes “a Google spokesman” saying that the culture won’t change: “Our unique culture is an essential part of what makes Google Google.”

When it went public Google had wanted to avoid the conventional pressures of being a public company but some of what is going on right now — despite having $14 billion in cash — is a response to the demands of Wall Street and investors. Investors would punish Google further for not taking some of the measures it’s taking now. The market imposes discipline but it’s also shortsighted because investors these days are engaged in near-term speculation about stock prices.

In addition to cutting expenses and trying to be more frugal (Froogle), Google is seeking to expand and diversify monetization and revenue streams. To that end the company has announced expansion of its TVAds program, to include Hallmark:

Hallmark Channel and Google announced today a strategic agreement to offer advertisers access to high-quality family-friendly programming through the Google TV Ads program. Advertisers will now be able to reach even more viewers by using Google TV Ads platform to place ads on both Hallmark Channel and Hallmark Movie Channel . . .

Hallmark Channel and Hallmark Movie Channel join Google TV Ads’ growing list of inventory partners, which also includes six networks from the NBC Universal Fi, Oxygen, MSNBC, CNBC, Sleuth, and Chiller—along with Bloomberg Television and 96 networks through DISH Network.

And finally today the NY Times goes behind Twitter’s rejection of an almost all-stock transaction with Facebook: “It definitely made sense . . . but it wasn’t the right time,” said Twitter CEO Evan Williams. That means the two will likely be at the table again in 2009 at some point.

Beyond this angle the article is worth reading and addresses a range of issues, like potential ways that Twitter will make revenue in early 2009 (now a priority). Williams was one of the founders Pyra Labs, which created Blogger and was acquired by Google in 2003.