Google sees first ever drop in revenue

The company reported profits for the second quarter were up 8.9 per cent, from US$1.31 billion to $1.42 billion.

However, for the first time since Google went public - revenues fell, down three per cent at US$5.51 billion, although they were up six per cent from the fisrst quarter of last year.

"Google had a good quarter given the depth of the recession—while revenues were down quarter over quarter, they grew 6 per cent year over year, thanks to continued strong query growth. These results underline both the resilience of our business model and the ongoing potential of the web as users and advertisers shift online," said Eric Schmidt, chief executive of Google.

"Going forward, our priority remains investing for the long term to drive future growth in our core and emerging businesses."

Advertisers were still spending he said, but at lower rates than had been seen and they were driving harder bargains.

Schmidt said that the company was keeping a tight rein on spending and had cut back on hiring new staff. In March the company announced its first ever large scale layoffs and over 200 jobs.

The company also announced that its top sales executive, Omid Kordestani, would become senior adviser to Schmidt and would be replaced by the current president of international operations Nikesh Arora.