Google Doesn't "Make Its Own Weather"

Sam Gustin recalls Google chief executive Eric Schmidt's comments at last week's mogul confab in Sun Valley: "We make our own weather."

Schmidt was making the case that thanks to its superior advertising technology, Google is less vulnerable to outside economic pressures than other companies. Because Google's advertising system has been so effective, Schmidt argued, marketers are more likely to stick with Google during tough economic times.

Today, however, we learned that Google is not immune from the country's broader economic malaise. The search juggernaut missed Wall Street earnings expectations, sending the company's shares down more than 10 percent in after-hours trading.

Google reported that paid clicks were down 1 percent sequentially, and revenue from the company's AdSense program was down 2 percent sequentially.

What makes Google's report all the more distressing is the fact that many on Wall Street were anticipating an "upside surprise," thanks to strong international growth and growing search market share.

On a conference call with analysts, Google's chief economist Hal Varian acknowledged that the slowdown in consumer spending is affecting Google's results.

Google's earnings miss should bring to an end its recent honeymoon of sorts, as Wall Street and the financial press have focused on its two largest competitors, Yahoo and Microsoft, as they tear each other to shreds in their ongoing takeover battle.

Over the last decade, Google's rise has been one of the most amazing business stories in corporate history. But as today's results show, no company, not even Google, "makes its own weather."