SAN FRANCISCO: Tough times in the US economy play into Google’s strength as businesses trust the Internet giant to best target their precious advertising dollars, analysts said on Friday.

While the US economy staggers and the dollar sinks, Google’s profits defied worries and soared to $1.31 billion in the first three months of the year.

The California firm’s stock price rocketed more than 20 per cent, nearly $100 per share, in the wake of Thursday’s stellar earnings report.

Investors had fretted that the economic downturn would pour cold water on the online search and advertising titan’s earnings growth.

Analysts credit Google’s unrelenting focus on helping people find what they want on the internet and then matching search results with online advertising they are likely to click on.

Google makes the bulk of its cash from “pay-per-click” advertising, and the company reported $5.19 billion in revenue during the quarter while the US economy was rife with talk of recession.

“Google’s business model is making sure advertising hits the mark,” Global Crown Capital analyst Martin Pyykkonen said.

“If companies have to cut back, it will be in more general advertising such as television, newspapers and magazines.” Internet users may think of Google as being all about online search, but its business model is all about cashing in on sniper-like accuracy when it comes to targeted advertising.

Canaccord Adams analyst Colin Gillis describes Google as a “direct marketing tool” that provides advertisers with analysis tools letting them refine ads and measure their effectiveness.

Companies tightening budgets in tough times will still invest in advertising they believe is working, analysts said.

“With Google, you can track the results from each click that you pay,” Gillis said. “If you are making a healthy return on your spend, you are going to continue to do that.” If anything, the downturn in the economy could hasten the demise of “less effective” previous-generation advertising channels such as television and newspapers, according to Gillis.

AdAge magazine reports that car maker General Motors is planning to steer half of its $3 billion advertising budget online within the next three years.

GM currently spends $300 million on internet advertising, while data shows half the people looking for cars begin their shopping on the internet.

Billions of advertising dollars are “in play” from businesses eager for better ways to connect with customers, according to Gillis.

“Google figured out early that search wasn’t the business they are really in; it is advertising,” said Silicon Valley analyst Rob Enderle.

“They wanted to get their arms around the engine beneath internet advertising. They figured out if they could get a piece of that, they could make a lot of money.”

Google’s biggest strength could be its greatest vulnerability, though, some say. Analysts say if anything undermines the company’s online ad revenue, it has no other revenue streams to fall back on.“They invented an industry and they dominate it competitively,” Pyykkonen said.

“DoubleClick is hugely strategic for us,” Google chief executive Eric Schmidt said during an earnings conference call with analysts and press.

“We are showing fewer but much better ads in each cycle, and that is a key part of Google’s success story.”—AFP