Google Eyes Strong Q1 Despite Pressure from Governments, Apple, Facebook

Google will report its first-quarter earnings after market close April 15. Analysts expect the company to report $6.57 in earnings per share on sales of $4.93 billion, up from $5.16 EPS on $4.1 billion in revenue in the first quarter of 2009. Although Google retained a 65 percent search market share in March, its future outlook is less clear, given pressure from governments and rivals such as Apple, Facebook and Microsoft. This gives investors reason to be cautious.

Industry analysts expect a strong first quarter from Internet bellwether Google despite government challenges in the United States and abroad and competition from Apple and Facebook.

Google will report first-quarter earnings after the market closes April 15. Analysts polled by Thomson Reuters said they believe Google will report $6.57 in earnings per share on sales of $4.93 billion, up from the $5.16 EPS on $4.1 billion in revenue the company recorded in the first quarter of 2009.

Broadpoint AmTech analyst Ben Schachter has increased his first-quarter EPS estimate from $6.62 to $6.71, citing the rebound in the economy and the subsequent positive impact on cost-per-clicks and monetization boosts from new product listing ads and site-link ads.

Jefferies and Co. analyst Youssef Squali said he expects Google to post net revenue of $4.93 billion and EPS of $6.60. Echoing Schachter, Squali said Google's growth in query volume and emerging product ads, site links and image ads could lead to a positive surprise in paid click growth. Squali said he expects Google's paid click growth to be 12 percent year over year.

Moreover, Squali noted that with query volume growing 14 percent year over year in the first quarter, Google grew faster in core search than the market, which grew 10 percent for the latest quarter.

Google also retained 65 percent search market share through March despite a strong showing from Microsoft's Bing search service, according to ComScore. Bing's share of the market has grown from 8 percent in May 2009 to 11.7 percent in March 2010.

All of these results are encouraging in the short term, but Google's future outlook is less clear. Google faces a lot of pressures from governments and rivals that give investors cause to be skittish.

In the United States, the Department of Justice has been a key obstacle to the Google Book Search settlement to scan books and sale them online. Amazon.com with its Kindle and other e-reader vendors continue to sell access to digital books, expanding their lead in the market.

The Federal Trade Commission has held up Google's proposed $750 million acquisition of mobile ad provider AdMob.

This acquisition would give Google access to a large quantity of data around ads that run on applications for Apple's iPhone, and could help Google tailor ads for smartphones running its own Android operating system, which is now the No. 4 smartphone platform in the United States.

Apple used the FTC's laborious investigation to its advantage, unveiling the iAd in-application advertising platform for the iPhone April 8.

Difficulties with governments abroad haunt Google as well. Search rivals and other Internet companies in Europe complained to the European Commission accusing Google of anticompetitive practices, which the Commission takes very seriously and is currently investigating.  

In response to a cyber-attack on its users' Gmail accounts, Google ran afoul of the Chinese government by ceasing to censor search results there, shuttering its Google.cn site and porting users to Google.hk.

Google also faces pressure from Microsoft, which is expected to challenge Google Apps in the area of cloud collaboration with Office 2010 in May, and Facebook, which saw a 48 percent increase in its search queries in March.

The social network's more than 400 million Internet users continue to spend more time on the Website, which means they are spending a little less time searching via Google.

During the first-quarter earnings conference call tomorrow, eWEEK expects financial analysts to pepper Google CEO Eric Schmidt and his fellow executives with questions about making money beyond desktop search. Analysts will inquire about ad sales on YouTube and enterprise sales of Google Apps, but especially sales of the Google Nexus One and the company's plans to bring that phone to other carriers beside T-Mobile.