Google posts 18 percent sales gain, details how it's coping

Google's 18% revenue jump didn't come as any huge stunner, but execs revealed this evening how their company is weathering the financial crisis, through measures that include a new stock option plan aimed at employee retention.

Google's revenues for the fourth quarter of 2008 ending December 31 added up to $5.7 billion, as opposed to $4.83 billion the same period a year ago, the Google officials said in Thursday night's conference call with financial analysts.

On the other hand, Google also reported a 68% drop in Q4 profit. During the call, Google said it recorded a $355 million impairment charge around its $500 million investment in Clearwire -- a company that recently completed its WiMAX merger with Sprint -- plus a $726 million impairment charge around its investment in AOL.

But Google also shed light on how its search-advertising business and recently initiated cost reductions are easing the company through the financial crunch.

As the same Google executives predicted in a similar call a quarter ago, Google's ad sales benefited during the holiday season from aggressive price promotions by retailers. In terms of the products and services searched for, automotive searches turned out to be surprisingly popular, showing that at least some folks were looking to buy cars from October through December.

On the real estate side, searches for foreclosures -- as opposed to mortgages, for example -- grew unusually prevalent, analysts were told tonight.

Officials said they didn't feel any threat from Microsoft's Live Search Cashback, contending that their own own product search service is thriving both in the US and internationally.

Also during the quarter, Google saw increasing corporate demand for Google Apps, according to Google CEO Eric Schmidt. The suite constitutes Google's answer to Microsoft Office.

Google continued to clean up its AdSense Network, while also implementing new cost containment measures spearheaded by Patrick Pichette, who joined Google about six months ago as CFO from Bell Canada, where he held the same title.

"Some shopping-oriented sites were working in a way that wasn't consistent with our sites," noted Jonathan Rosenberg, Google's senior vice president of product management, who equated the AdSense clean-up with "getting rid of spam."

Google is also "managing contractors in a better fashion," using computers more efficiently, and pruning its use of professional services, Rosenberg said.

Rosenberg joked that he wants bottled water back as a perk, but Pichette told him he couldn't have it.

New jobs added at Google have amounted to only 400 in the third quarter of 2008 and 100 in the fourth quarter. But in a month when Microsoft laid off 5,000 people, Google has shed only 100 jobs, and all of these were employment recruiters.

In a real departure from the rounds of layoffs at other companies, Google's new employee stock option program is supposedly geared to keeping existing staff on board. Essentially, the program allows employees to exchange their old and now worthless Google stock options for more lucrative options revolving around Google's current price.

Google recently announced that it's dropping both its print ad service and Dodgeball social networking offering.

Schmidt said tonight that his company has also scaled down less-than-profitable projects such as Google Notebook, Google Video, and Jaiku, a status update service.