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Insider: Google "Very Exposed" to U.S. Recession

We've got a "rough" next few quarters ahead of us as the U.S. economy dips into recession, and Web giant Google is as badly exposed as anybody else. Google is at risk because a significant portion of its advertiser base is at risk. Consumers will spend less during a recession, which means Google ROI will drop for advertisers, forcing them to spend less with the search giant.

One digital agency insider, who does not have access to Google data, estimates the following: there are 1.2 million total AdWords customers, approximately 800,000 of which are active; approximately 60 percent of AdWords revenue comes from customers who spend $200,000 or less per month; approximately 50 percent of AdWords revenue comes from those spending less than $50,000 per month; and approximately 20 percent spend less than $10,000 per month. The insider claims the primary exposure comes from small to midsize advertisers spending $50,000 or less per month, a segment which represents approximately one-third of Google's revenue. If this segment were to decrease spending by say, one-third, then Google's revenue growth would slowdown sharply.

Many of these advertisers are retailers, real estate companies, financial services firms and other businesses that have been hard hit by the consumer credit crunch. The insider says he's seen a significant slowdown in spending from these small-to-mid size advertisers in recent months.

Read the whole story at Silicon Alley Insider »

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