Google earns $1.42 billion in 1Q

MOUNTAIN VIEW, CA (KGO) -- Google failed to keep a nearly five-year streak of revenue growth going, but the search engine giant still turned a profit in the first quarter.

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Sooner or later, Google had to prove if its popularity as a search engine could keep growing, even in a recession.

It cannot. Its first quarter revenue was 6.2 percent higher than a year ago, but it fell 3 percent from the last quarter. It is the first time Google has failed to show growth in consecutive quarters.

CEO Eric Schmidt blamed the recession.

"We're still basically in unchartered territory, the current economic environment remains tough," Schmidt said during a company webcast.

Google makes most of its money from online advertising. When a person uses Google to find something, it delivers relevant ad links. And it gets paid by advertisers if and when the person clicks.

"Users are still searching, but they're buying less, more window and comparison shopping, purchasing lower priced goods, in other words, users are doing the right thing," Schmidt said.

Despite that, the recession is exactly why the gift web site, Beau-coup.com, boosted its online ad spending.

"We consciously made a decision to increase our spending in this channel in particular," company founder and President Polly Liu said.

Liu says $35,000 in Google ad spending is paying off.

"We've actually doubled our spending in AdWords alone, and we've doubled our revenue and our orders, so it's done great for us," Liu said.

That is keeping 30 employees shipping unique gifts at a time when other companies are laying off.

However, Google and other online sites are getting more aggressive to sell ads and to generate revenue. San Francisco's Mortar Agency places online ads for clients.

"We're getting a lot more calls from online properties generally, and we're enjoying a lot more visits from the media rep's with cookies and stuff like that, they're a lot more aggressive about courting our business," co-founder Mark Williams said.

Google gets over 70 percent of all ad dollars spent online. Yahoo is a distant second. Yahoo's quarterly earnings come out on Tuesday.

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