Google searching for end to downturn

The US economy is not turning around yet and the next two quarters will be "very, very tough", Google chief executive Eric Schmidt says.

He told an investor conference in San Francisco that spending by travel, car and financial-services companies had slowed.

"I view the situation as pretty dire," said Schmidt. "The combination of everything that we have seen does not appear to have a bottom."

Google faces a slowdown in online advertising spending as the world grapples with the economic slowdown. The company, whose sales increased 31 per cent last year, has slowed hiring and cut capital spending by 46 per cent in the fourth quarter. Google has also closed underperforming businesses, such as its radio advertising unit.

"Everyone's assuming that 2009 is a tough, tough year," Schmidt said.

Google, while not immune to the recession, is better positioned than other companies because people are using the internet more during the slowdown, Schmidt says. Online advertising also continues to gain a greater share of customers' budgets.

DoubleClick, which Google acquired last year, will be an important source of revenue growth, Schmidt says. The business specialises in display ads, such as banner ads, complementing the text-ads that run alongside web-search results. Google will now hold off on acquiring companies until prices decline further.

Schmidt said he campaigned for the economic stimulus package, which was passed last month, because the Government needed to act to spur consumer and business spending.

US consumers would drive the economy when they gained confidence and began to tap credit more aggressively.

"It's a reasonable bet that we will go back to what we do best - which is to spend money," he said.

Four of Google's top executives each received 2008 bonuses of more than US$1.2 million ($2.4 million) for helping the internet search leader eke out modest earnings growth during a recession that battered much of corporate America.

The bonuses disclosed in a regulatory filing were less than those in 2007 when Google's profit rose 37 per cent, dwarfing 2008's gain of 1 per cent.

The company's market value plunged by about US$120 billion, or 56 per cent last year, reflecting concerns that the weakening economy will eviscerate the online advertising market that generates virtually all of Google's revenue.

Following company tradition, Google didn't pay bonuses to Schmidt or co-founders Larry Page and Sergey Brin. Those three men are all billionaires, thanks to their large stock holdings in Google.

Jonathan Rosenberg, who oversees Google's products, received the largest bonus at US$1.64 million, a 3 per cent decrease from 2007's incentive award of US$1.68 million.

Omid Kordestani, Google's top sales executive, and Alan Eustace, who oversees the company's engineers, each got bonuses of US$1.38 million, an 18 per cent cut from US$1.68 million in 2007.

- BLOOMBERG, AP