GOOGLE’S FIRST-QUARTER profit has topped expectations, helped by cost controls, but chief executive Eric Schmidt said the economic environment remained tough with internet users still searching but buying less.

“We’re still basically in uncharted territory,” Mr Schmidt said on a conference call. “Google is absolutely feeling the impact. Users are still searching but they’re buying less. Ultimately, what that really means is the ads are converting less.”

Compared to other internet and media companies that depend on advertising revenue, Google has been extremely resilient to the economic downturn, although its revenue growth has slowed sharply from the heady 50 per cent rates it used to enjoy.

Google reported first-quarter revenue of $5.51 billion (€4.2 billion), up 6 per cent from the year- ago quarter, but down 3 per cent from the 2008 fourth quarter – its first ever sequential decline.

Net profit for the quarter ended March 31st was $1.42 billion, or $4.49 cents a share, up from $1.31 billion, or $4.12 a share, a year earlier. Excluding special items, Google earned $5.16 a share, ahead of the average Wall Street forecast of $4.93.

Google executives said lower labour costs, as the company reset performance-based bonuses for the new year, kept expenses in line. After several years in which Google expanded its workforce, the company’s head count declined slightly in the first quarter to 20,164 employees worldwide.

The firm employs more than 1,600 staff at its European operations centre in Dublin.

Google announced three rounds of layoffs in the first quarter.

Separately, Google’s YouTube says it has signed a deal with Sony Corp to add the company’s films and TV shows to the video-sharing site and that it was talking with other big studios. – (Reuters)