Skip to content
Subscriber Only

Google: The Hollow Echo of a Click

The soft economy could hit the search giant, but beyond that, the basic ad model may need an upgrade

It looks like the consumer spending crunch may even hit Google (GOOG). On Feb.26 the Internet giant's stock tumbled 4.7% after a research firm reported a decline in the number of clicks on the ads alongside Google's search results. The report, from researcher comScore (SCOR), fueled fears that as cash-strapped consumers ignore online ads, marketers will trim their spending on the Net. It also undermined assertions by Google co-founder Sergey Brin and others that the company could thrive in a recession as ad spending shifts.

The issue for Google may be broader than just a slowdown in consumer spending. There's a growing realization that the company's advertising model may not deliver quite what it promises to clients. Google, along with Yahoo! (YHOO) and Microsoft (MSFT), has long maintained that online advertising is the ultimate in pay for performance, because advertisers only pay if someone clicks on an ad.