Best Financial Markets Analysis Article One of the sectors expected to be hardest hit during the recession is advertising and in that respect the king of web-based advertising Google, is expected to experience a sharp fall in earnings for the fourth quarter. The recession is already being felt by thousands of internet web site publishers that rely heavily on google adsense earnings that are witnessing drops in earnings rates of more than 50% in recent weeks as Google passes on the falling revenues directly to publishers in an attempt to bolster its bottom line.

The expectation is that the recession will continue to erode advertising revenues which will be reflected in a continuing sharp drop in adsense earnings for web publishers that could in many cases lead to as much as 80% of earnings evaporating from the peak levels. Similar impact on revenues is being experienced across the web advertisers in a fallout on a similar scale to that witnessed following the dot com bust that could see many web publishers disappear over the coming 12 months as many dot com business were wiped out following the dot com crash.

Wall street analysts renowned for repeatedly getting it wrong on the earnings front are still way behind the curve and have yet to cut earnings estimates for google to anywhere near what the web publishers are experiencing as earnings revenues fall sharply, with typical estimates of $5.15 for the fourth quarter (2008 total $20) and $22 per share for 2009. However we could see these figures off by as much as 20%, implying $4 for the fourth quarter and 2009 coming in at under $18 per share.

The Google share price continues to suffer by breaking below critical support of 331, which now targets a longer term trend towards $200. Today's close of 291 represents a fall of 61% from the October 2007 high as investors continue to discount a recession. Consensus forecasts for 2009 earnings of $22 put Google now on a forward P/E of 13. However on the Market Oracle earnings estimate google stands at a forward P/E of 16. Which is a far cry from the late 2007 P/E of 40.

Chart Courtesy of stockcharts.com

By Nadeem Walayat
http://www.marketoracle.co.uk

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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Comments

Chris Clark
14 Nov 08, 17:23

Adsense Earnings

Nadeem, would you be able to provide your sources for this article? It's going to put the wind up a lot of people in my network.

Many thanks

Chris Clark

Moneymaker
23 Oct 09, 10:07

Google AdSense

Good morning. Can I make money using google adsense in yahoo geocities or any other free web hosting site?

I have already google adsense Ads on my website but I dont have people click my ad on my blog either. I think ive made about $0.30 today. Thats pretty bad.....

Nadeem_Walayat
24 Oct 09, 11:59

Google profits

Now you see why Google makes record profits

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