Google Vulnerable to Shrinking Ad Dollar

SAN FRANCISCO -- Google's(GOOG Quote) tough resilience in the face of economic turmoil may soon be a thing of the past.

The company will post its third-quarter earnings after the close, and while no one expects it to flop, there is less chance of it coming out unscathed the way it always has, to the envy of other Internet companies such as Yahoo!(YHOO Quote) and eBay(EBAY Quote).

In keeping with regular practice -- one that has frustrated many analysts -- Google has not provided any guidance on its results. But Wall Street predicts it will earn $4.80 a share on revenue of $4.05 billion.

Online advertising in general has been feeling pressure from advertisers pulling back on their spending in a down economy. Search ads -- where Google dominates and makes the bulk of its money -- have escaped most of the pain, since they typically generate a high return on investment.

But some analysts see advertisers cutting back on the dollar amount they are willing to pay for the search ads, and that could affect Google's revenue.

Jeffrey Lindsay, an analyst for Sanford Bernstein, expects paid-search conversion rates to fall, writing in his research that "even if people are clicking the ads, we think fewer of them are actually buying the goods and services, which reduces the advertiser's ROI."

Lindsay reduced his revenue growth projections for online advertising as a whole to 17% this year from his previous forecast of 20%. He also lowered his compound annual growth rate through 2012 to 12% from his earlier prediction of 15%.