• by Laurie Sullivan  @lauriesullivan, July 14, 2009

Google is scheduled to report second quarter earnings after the close of the stock market on Thursday, and analysts have set the bar low this quarter.

Analysts expect Google, by far the dominant force in global search, to report that its core business held up relatively well in the second quarter. Broadpoint.AmTech Analyst Ben Schachter wrote in a research note to expect sequential net revenue growth between 1% and 2%, "boosted by an estimated 3% tailwind to international revenue, thanks to a weakening dollar."

"Bonus accruals," the amount Google will give out at the end of the year, could become an issue on the earnings call because it raises operating expenses, Schachter told Online Media Daily. "The consensus view is that revenue will come in fine, but anything other than fine could become an issue," he says.

Schachter believes Google has managed to get a handle on operating expenses and limited headcount growth, which should see non-GAAP EBIT margins expand to 51.1%. The earnings call will likely include search market share, evolution of SERP monetization beyond CPC text links, and an update on progress of its video, display, mobile, and enterprise businesses.

Google managed to maintain its share of paid searches through May at 65.2% worldwide with 58.5% of total searches in the U.S. or 63.1% of core search (among the top 5 U.S. players only), according to Sanford C. Bernstein & Co. released Tuesday.

The analyst's research firm estimate's Google lost 120bps U.S. search share to Microsoft's Bing search engine following its launch, based upon projections from Hitwise and comScore, but suggests the loss has been driven by trial and curiosity. It's expected that Microsoft will cede these early gains later in the year, consistent with the company's experience when it introduced Windows Live Search with Cashback in the third quarter of 2008.

Google should see revenue reach $4.22 billion, representing growth of about 8% year on year and 4% sequentially, versus consensus of $4.05 billion, or about a 4.4% gain from the prior year, according to Sanford C. Bernstein & Co.

Jeffrey Lindsay, an analyst at Sanford C. Bernstein, wrote in the report that paid click growth should remain at the 17% year on year rate seen in the first quarter of 2009. He expects revenue per search to drop again by 7%, compared with the year-ago quarter, but expects revenue per search to recover significantly back to a 1% year-over-year gain by the end of 2009.

"We expect paid click growth of 3% year-over-year in the U.S. and 22% year-over-year overseas giving a global average of 17% year on year," Lindsay wrote. "However, we expect revenue per click worldwide to be down, 7% year over year, or up [about] 6% sequentially, primarily because of the lower conversion rates of paid search under the current economic conditions. According to our model, this translates into global gross paid search revenue growth of 8%."