• by Diane Mermigas , April 16, 2010

Coming off last year's bottom, it will be easy for most media companies to report positive -- if not outstanding -- quarterly financials in 2010 without regard for radically changing business fundamentals.

This year's recovery is a claw back from the 2009 recessionary trough, which is not the same as genuine growth.

The truth about the media industry's new normal -- the juxtaposition of historic and emerging income streams, strategies and values -- will become more apparent in 2011. By then, the bolstering impact of federal government stimulus on consumer and business sentiment will dissipate in the absence of election and Olympics advertising.

Add to that the accepted practice of companies lowering earnings expectations, making it easier for them to beat analyst estimates, and you have the makings in 2010 of dangerous artificial highs.

All of those misleading and complex dynamics will come to bear across the media spectrum in the coming months. It is evident in the lofty first-quarter returns reported by Internet players as formidable as Google, which provides a good case in point.

Google is a bellwether for an increasingly holistic advertising market, in which digital Internet and more traditional media placement  intertwine. Interactive advertising, especially on mobile devices, will steadily advance Madison Avenue economics to include e-transactions. E-marketing and social network mining for new target consumers.

Indeed, mobile and international are two of the only areas of double-digit growth for Internet and media players.

Google reported April 15 that its first quarter paid click growth accelerated for the first time in nearly 16 months, up 15% from a year ago but still below the near 20% quarterly gains made throughout 2008. Like the economy, advertising is coming back slowly.  Google, like everyone else, is working to regain lost ground.

Google's dominant Internet and advertising platform is search, which rules on laptop computers but appears to be taking a back seat to apps mobile devices. So far, Google biggest mobile plays are the Android operating system and phone, which are still gaining traction.

While overall international markets generate 53% of Google's total revenues, they grew only 1.7% in the quarter and are not expected to do much better overall for the year.  It is  disconcerting that Google is fast losing ground in China, which is less than 2% of its business today, but would surely grow in the world's largest market.

 But the opportunity in China and the rest of the world for Google, like other Internet and media players, is all about mobile. And there, even the mighty Google is challenged.

Another force, not as easily quantified but as potent, are social networks. While Google was smart enough to buy YouTube several years ago for $1.6 billion, it is only now breaking even on the dominant streaming video site, which is still searching for an ad-based business model.

All the while, Facebook has been gaining ground and now generates almost as much traffic from its "friend" newsfeeds as Google does from its searches. There are many ways Facebook founding CEO Mark Zuckerberg will be able to monetize that traffic, including charging "finder fees" to businesses whose sites benefit from member recommendations. The social network's recent efforts at consumer relevant advertising are working.

You won't hear much about that on Google's earnings calls, in which CEO Eric Schmidt says he will no longer participate. Unfortunately, there is insufficient focus on such shifting fundamentals, which will not be able to hide from any company balance sheets and playbooks in 2011.

With a $26 billion cash hoard, nearly $13 billion in earnings on $21 billion in annual revenues, and a $200 billion market cap, Google can take the Wall Street conversation anywhere it wants.

Even the most challenged old-line media company will be similarly empowered this year by improved financials coming out of 2009's extreme cost cuts, consumer pullback and overall financial malaise. It serves the short-term investor market well.

Paying close attention: What is not being reported and discussed may signal which Internet and media players are best-situated for the digital interactive future, and which will still be dancing when this short-lived party ends.

More about Diane Mermigas consulting and speaking opportunities at Mermigas on Media; more analysis at BNET and Seeking Alpha.