Big time Earnings report from Google !

SAN FRANCISCO (MarketWatch) -- The Google Inc. juggernaut came roaring back Thursday with a better than expected earnings report, but investors would do well to take a step back before phoning in those big buy orders.
Wall Street had been nervous about Google's (GOOG:
GOOG 449.54, -5.49, -1.2%) earnings in light of recent data from research firms like comScore Inc., which indicated that the search giant was seeing a decline in total paid clicks related to ads served on Google sites. The company appeared to silence its critics by reporting that total paid clicks jumped 20% in the first quarter vs. the year-ago quarter. This led to a significant pop for the shares in after-hours trading. See full story.
However, it is worth noting that the 20% growth rate for paid clicks is the lowest growth rate since the company began reporting this metric in the fourth quarter of 2006. In last year's first quarter, paid clicks jumped 52% from the previous year -- more than double the growth rate for the recent period.
One analyst asked company executives about the deceleration trend on the conference call, but Chief Executive Eric Schmidt was unfazed. "We know if we can improve aggregate quality, the number of clicks will grow," he said. "Our absolute growth rate has been very, very significant and we are very very optimistic that this focus on quality will give us a much better solution for advertisers." Schmidt was referring to the company's ongoing efforts to clean up and improve the quality of search results.
But the company's top line still does not seem to be reflecting this effort. While revenues excluding traffic acquisition costs grew 46% from the previous year, this also looks to be a record low for Google. The company's revenue grew 65% in last year's first quarter and a whopping 92% in the first quarter of 2005. Many companies would kill for double-digit revenue growth in the 40% line, but that's not what Google's investors have come to expect.
Mark Mahaney of Citigroup confirmed this view in his post-earnings note to clients. While staying highly bullish on Google's shares, he conceded that "there is deceleration here, but it appears to be much more 'Large Numbers Law Trendline'" -- another way of saying that the bigger you get, the slower you grow.
So as Google keeps getting bigger, it obviously cannot match its prior, hefty growth rates. It seems to be quickly maturing as a company, and investors should keep this in mind.
-- Therese Poletti
Marketwatch
please read my Jan. 2008 stock picks on ( Google )