Google’s effort to help a stagnating economy and maintain its number one status in the world of online searching has actually hurt, rather than helped, the internet giant. Google’s part in stimulating the economy includes creating 1200 new jobs in the second quarter in order to delve into new opportunities such as online video, wireless devices, software systems, and most recently, Google TV. The soaring rate of payroll has increased expenses dramatically and subsequently hurt Google’s stock price. Shares dropped 4.7% ($23.32) in premarket trading Friday.
Another potentially dangerous situation for Google lies in the instability of the euro, since nearly one-third of Google’s revenue comes from Europe. High national debts in Spain, Greece, Italy, and Portugal have investors nervous that if these countries default, the euro will crumble. Sales from customers paying with the euro have resulted in fewer dollars due to the currency’s weakened state.
Google executives remain optimistic about the future, but some investors are more skeptical and not as quick to believe the company’s spokespeople toeing the corporate line. Investors are also closely monitoring revenue generated by clicks on Google ads, which shows promise for the company since ad-click revenue for the second quarter is up 15% from last year. Google might be walking a financial tightrope and making its investors sweat, but in the short term it appears that online advertising remains stable with continued promise for the foreseeable future.
