Google posted a 39% increase in revenue for the second quarter Thursday compared to the same period last year, but it whiffed on EPS, missing analysts' consensus target by more than a dime. That sent shares of GOOG down hard in after hours trading, at one point dropping more than 10% from its closing price. On the analyst call, Google officials acknowledged that the weak economy is starting to bite, particularly recession-sensitive ad categories like autos, real estate, finance and travel. Major capex spending as well as higher G&A--driven by all the lawyers and lobbyists Google has had to hire recently--undercut EPS.

Meanwhile, YouTube remains impervious to monetization models. CEO Eric Schmidt said Google was trying multiple ad strategies, including pre-roll, post-roll and "in-view" ads but had yet to hit on the formula for turning YouTube's huge traffic into meaningful revenue. The perfect ad format "hasn't been invented yet," Schmidt said, but promised it will blow up huge when it is.

Paul Sweeting

Paul Sweeting is the Editor of Content Agenda, a business-to-business brand dedicated to the nexus of content, technology and business. This piece was originally published on Paul's blog "Media Wonk" on Content Agenda and is posted on DMW with the author's permission.

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