5 Things Google's Earnings Say About Markets and the Economy

It's better than you expect.

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Google absolutely shone in the third quarter despite the devastation swirling around most of the market. The company's shares are climbing after a 26 percent jump in profits, which was propelled by online advertising that continues to draw more customer cash away from old media. At $5.54 billion, revenue was up 31 percent from a year ago. Paid clicks—from its site and partner sites—rose 18 percent from a year ago.

The health of America's most iconic tech company says a lot of about what's going right in at least a few corners of the market. Here are some things to consider:

1. Online is still happening faster than we think.
That paid click number, where even Google has said growth will slow, looks right in line with most expectations. Consumer spending may be weak, but it doesn't seem to have hurt the tech giant much at all. Google shares might be off 30, but as CEO Eric Schmidt said in a statement, "We had a good third quarter with strong traffic and revenue growth across all of our major geographies, thanks to the underlying strength of our core search and ads business." The Internet will account for 8.7 percent of the $284 billion in U.S. ad spending this year, up from 7.2 percent in 2007, according to Barclays Capital (via Bloomberg).

2. Being "realistic" about the economy matters.
That's the word Google execs have used, and the truth is that, while Google's business did show signs of cooling and may not be totally immune to a recessionary economy, it's "clearly more resilient to macro headwinds than other companies," according to Mark Mahaney at Citigroup.

3. Wall Street now expects the worst, even from the best.
Pessimism isn't surprising, but earnings so far in the third quarter have at least not been horrible. For Google, analysts were expecting a miss. But it looks like size matters, and as American Technology Research analyst Rob Sanderson said before the call, the paid search model is "very resilient."

4. Washington matters everywhere right now.
As Google waits for approval to partner with Yahoo, Microsoft sent its former merger target a little love letter by hinting it could revisit the deal. Yahoo jumped 15 percent, and all Google said was that it's "hopefully" nearing the end of the government review process for its deal. Meanwhile, Microsoft is reportedly lobbying like mad to block the deal.

5. Job losses aren't universal.
Google hired 500 new employees in the quarter. While that won't make up for the sort of cuts hitting online neighbors like Ebay, it's nothing to overlook, either.