Fewer Ad Clicks Send Google Shares Down

Even Internet powerhouse Google is showing signs of trouble.

Investors yesterday reacted to the latest evidence that fewer people in the United States are clicking on the online ads that generate most of the Web search leader's profits.

The trend, captured in a closely followed report from Internet research firm ComScore, prompted Google shares to hit an 11-month low. Google shares reached $747.24 in early November, but yesterday closed down $22.25 at $464.19 a share.

The sell-off represents a sobering shift in Wall Street's sentiment toward Google, whose dominance of the lucrative Internet-search market had convinced many investors that the company would thrive even in a recession.

Disappointing fourth-quarter earnings growth and ComScore data pointing to sluggish ad growth in January are causing more analysts to conclude that even Google may be pulled down by the sagging U.S. economy. Looking ahead, some investors are worried about Microsoft becoming a more imposing competitor if it pulls off its proposed takeover of Yahoo.

"We don't see a compelling reason to buy the stock right now because we think there's going to be a rocky few months ahead for Google," said Clayton F. Moran, an analyst with Stanford Group.

Other analysts, though, say they believe Google will deliver stellar earnings and revenue growth this year. They attribute the recent slowdown in Google's growth to deliberate changes that were made to weed out advertising links that don't conform with the company's policies or don't appeal to consumers.

Just a few weeks ago, Google Chairman Eric E. Schmidt tried to dispel the notion that the feeble U.S. economy had undercut the company's fourth-quarter revenue, which rose 51 percent to $4.8 billion.

"I am happy to say we have not seen a negative impact from the rumors of a future recession," Schmidt told analysts during a Jan. 31 conference call.

But ComScore's statistics indicate that Google had an unusually difficult first month: The number of Google's paid clicks in January totaled 532 million, down from 533 million in the comparable period last year.

The results marked the first year-to-year decline in Google's paid clicks the six months for which ComScore has comparable data. In the previous five months, Google's paid clicks had increased by a range of 12 percent to 60 percent.