Internet advertising increased a bit–1.7 percent, precisely–over the past three months. But that’s only when compared with the previous three months, according to the Interactive Advertising Bureau. Compared with the same period a year ago, Web ads are still down 5.4 percent, the trade group said (see chart below; click to enlarge).

Given that I work for a free, ad-supported Web site, I’m anything but an unbiased observer here, and I’d like to put a sunnier spin on things. But recall that the economy started its freefall well over a year ago, so comparisons to Q3 2008 should be particularly easy to beat. Even the boosterish IAB can only call the numbers a “hopeful sign” at best.

Still, if you’re looking for positive signs, you can take Google’s (GOOG) declaration that the worst is over, and I’ve heard plenty of anecdotal stories from small online players that spending is perking up again–though I’m also beginning to hear that some folks may have been overly optimistic about Q4. We’ll know soon.

The latest unpleasant news comes from magazine heavyweight Meredith (MDP), which does its best to explain that things aren’t that bad: Two of the publisher’s big titles–Better Homes and Gardens and Family Circle–saw ad revenue grow in the last quarter, and the company says its magazine unit notched its “third consecutive quarter of advertising performance improvement.”

That sounds good, right? Except that magazine ad revenue still dropped five percent compared with the same quarter a year–and last year’s quarter was a terrible one in which ads dropped by 18 percent.

More data points to watch for in the next few days: The Washington Post (WPO), which reports tomorrow, and Time Warner (TWX), due up next week.

Schmidt added a bit of nuance to that message today, noting that the company had been surprised to see its European business bounce back as quickly as it has. Here’s my transcript of his opening statement.

We are clearly seeing aspects of recovery, and what is notable is that we’re seeing aspects of recovery not just in the United States but in Europe. I had been in error in assuming that there would be a lag, that it would the U.S. first and Europe second. Asia, of course, was never significantly hit in the first place.

So that means from a Google perspective that…we never stopped hiring, but we told our team internally and again, we’ve said to many other people that we are increasing our hiring rate and our investment rate in anticipation of a recovery.

Schmidt and Google co-founder Sergey Brin covered a lot of ground in the hour-plus press conference, and I’ll try to go back and break out out some of the other highlights. A few items worth noting in summary:

• Brin expressed contrition over recent Gmail outages and said the company was working both to prevent future failures and to react more quickly if and when they do happen. But he reiterated the argument, common among cloud-computing fans, that conventional email systems fail much more frequently.
• Schmidt repeatedly defended the proposed settlement Google had reached with authors and publishers regarding its book archive. Recurring theme: It’s not a perfect settlement, but it’s workable.
• Schmidt stressed the importance of porting Google’s Chrome browser to Apple’s Mac platform and said this would happen within months.
• Schmidt said Google was working on ways to help publishers sell their work on the Web (via one-offs or subscription). But he said he had no interest in promoting one publisher’s results over another, as Associated Press officials had recently suggested: “We have to be very very careful not to favor one media organization over another, with regard to speed or latency.”
• Schmidt, who’d previously noted that he expected Google to start making an acquisition per month, said that these would likely be small, five-to-ten-person companies. He added that it was unlikely the company would be in the market for something the size of a YouTube acquisition, which cost Google $1.65 billion. Translation: Don’t expect us to pony up billions for Twitter.

Earlier: My live coverage of the press conference:

Google (GOOG) co-founder Sergey Brin is sitting down with about a dozen reporters in Google’s New York City headquarters for a Q&A session. Tune in for live coverage. This should be a wide-ranging conversation, which I’ll attempt to cover live as well as I can. Please consider everything below to be a paraphrase unless it’s in quotes.

Brin is joined by Google CEO Eric Schmidt. Brin gives an unofficial intro.

Schmidt adds his own informal introduction.

Schmidt: We’re here because we have a global sales meeting in New York, and we’re winding that up right now. A series of internal talks, and the mood was “very, very positive.” We told them that “the worst is behind us” (which Schmidt has said before). We’re seeing recovery not just in the U.S., but in Europe as well. I had been in error in thinking it would be U.S. first, then Europe second. Asia is less important, obviously. We’re increasing our hiring rate and investment rate in an anticipation of a recovery.

Brin discusses some tweaks to search. Do you feel that Microsoft’s innovations with Bing will cause you to accelerate your innovations?

Brin: Competition is healthy. Microsoft (MSFT) has made its contributions. So has Cuill. Many of the tweaks in Bing we’d already seen from Microsoft Live earlier in the year.

Schmidt: I agree!

But do you think Bing is really different? Or just a rebranding.

Brin: [Demurs]

Schmidt: You guys should judge us and our competitors. We’ve been criticized for having a self-referential view of the world. But I’d argue that our success so far proves that’s been a good strategy.

Please talk about Android and other mobile plans.

Brin: We started with Android because it was a problem for us, as an end-user and a developer, that phones lacked powerful browsers and the ability to install powerful apps. I think Android has addressed this very well, but it has also pushed the market. It has pushed Apple (AAPL) with the iPhone and RIM (RIMM) and Windows Mobile. I’m pretty excited about the future; they’re getting increasingly capable browsers, and you can now write native applications across five platforms that will cover most smart phones. I think that having the software platform has freed the hardware makers from spending time on that, and they can rejuvenate their efforts on hardware.

Please talk about enterprise efforts.

Brin: We started in enterprise, like mobile, to address our own needs. When we started with mail in ‘04, Web email was like a toy. We really focused on something that would work in an enterprise and then made it available to consumers. We feel we’re farther ahead (than competitors) both in email and in collaborative document-editing. We’re moving toward eventually having everything (all our applications) available everywhere. “I just think the cloud model is a better model….I do think this install-less model of a cloud is better….It’s definitely made me more productive.”

More on enterprise from Brin: We’ve been successful with both SMB [small and medium business] and increasingly with enterprise. We’ve got a big implementation with Genetech (DNA), and in Washington D.C. We’re specifically adding features for enterprise. That’s part of the Postini acquisition–to add some of those email features for enterprises. You’d be surprised to hear some of the things businesses ask for.

Please talk about recent Gmail outages.

Brin: Certainly we’re not happy with any outages. With those outages we’re at the “three nines” level, which is not where we want to be. Targeting “four nines” by end of quarter. We’ll let you know how we do. Focusing not only on outages, which we don’t like, but recovery time. Second outage could have been resolved in five or ten minutes, but we made errors in handling it, and it extended over an hour. But if you look at a typical enterprise today, those outages tend to add up to more than even these kinds of outages that we had in Q3. Also, we’re working on the number of people affected by outages. Trying to group people into pods so that if one goes down it doesn’t affect others.

You’re adding more complexity to search. It’s more confusing than it ever was. Same thing with site links. Is that an issue (it is for Danny Sullivan)?

Brin: I’d like to see all the options, available in all the corpuses. We don’t have all the same options in each offering. In terms of the links and snippets that we’re offering, we’re trying to experiment with that.

On Google book deal: If the judge asked you why he shouldn’t be concerned by the concentration of Google’s power, what would you say?

Schmidt: It’s an error to answer a theoretical question from a journalist. But anyway, we won’t get that kind of question. With respect to book search, we were doing something that we thought was appropriate. We were sued, and after three years of discussion, we’ve come to a settlement. This is perfectly normal. From our perspective, this is a settlement we like, it’s a settlement we think they’ll like, and we’ll hear what the court says, within minutes. Let me reframe your question: There’s nothing particularly exclusive about what we’re doing. The rights registry we’re doing is for the benefit of orphan works. “It’s not a particularly good business for us. We’re going it because we think it’s the right thing to do.” We don’t think the settlement is perfect, but we think it’s good.

What are plans to expand book search?

Schmidt: We’re already huge. There are millions of books that have never been read, and we’re going to deliver readers to those books.

Brin: We want as many works as possible in some form, because that’s of tremendous value.

Schmidt: This doesn’t cover all international books, all books in the world. [Some disagreement about this between Brin and Schmidt]. It will take time to get the registry up and running, so for the near future I think that’s all we can achieve.

Back to the economy, please.

Schmidt: We’ve tried for a while to figure out if Google is an accurate predictor of the economy, and we can’t prove it. If we could, we’d brag about it. Last early in the year we saw a decline in U.K., which surprised us. From our perspective, the low point was somewhere in the spring. Which is why I said worst was behind us in May, June. We noticed a recovery “June-ish.” The conventional wisdom is that U.S. recessions are 18-24 months. Bernanke sees a recovery too, which we agree with. Conventional wisdom was that Europe would lag by three-five months, which we’re not seeing. Europe is not one country, and it varies a great deal depending on which country we’re in. I won’t go in to specifics but it’s the obvious stuff–the countries that didn’t have a big bump did not have a big fall. More on being a leading indicator: Obviously we’re a leading indicator in advertising.

Brin: And we’re good indicator for consumer spending, and you can see for yourself by looking at Google trends.

It seems as if Chrome isn’t having the impact with consumers that you would like.

Brin: [Starts, then stopped by Schmidt]

Schmidt: Some of your premise about Chrome is incorrect, in terms of adoption, and we’re going to get that message out.

Brin: It’s actually exceeding our benchmarks.

Schmidt: I see a lot of Macs in this room, and a lot of very sophisticated people are using Macs now and we need to get a version of Chrome out for that, which we’ll have in a couple of months. Key to browser strength is speed. In general, we announced Chrome OS and Chromium product. Everything is linked together: Cloud, chrome, etc.

At one point do Android and the Chrome OS come together or not come together?

Schmidt: Current definition of use platforms has to do with use patterns. Android for mobile, delivered via telecom store, heavily integrated with telco offerings, like our Verizon (VZ) deal, which we’re enormously excited about. The analog for Chrome is that it’s designed for a 10, 12-inch form factor. They both use Linux, etc. But they’re designed for different uses. [Netbooks?] May be some overlap there.

Is Google being too nice? Is there a rethinking of relationships with aggrieved groups?

Schmidt: In many ways we’ve always wanted to be this Google as opposed to the way we were perceived a few years ago. We’re particularly proud of the way we’re working with advertising agencies, which is very important to us. With the media industry, we’re having success with YouTube and YouTube monetization, and we’ll have more on that coming forward….”We have always wanted to have these partnerships….We’re learning how to do them in a way that they win, too.”

Brin: People can now differentiate between us and the Internet.

Schmidt: Google is an innovator. The Internet is causing collisions. Innovation plus collisions equals opportunity. For instance, the fact that Verizon has embraced most of the open principles that we put forth five years ago is shocking. “It’s pretty amazing. This is Verizon. It’s not some itty-bitty telecom start-up.”

Are you uncomfortable with Google employees’ sense of entitlement? [Per new Ken Auletta book]

Brin: [Refers to layoffs--Schmidt corrects him: "We did not have layoffs."] [Addendum: Schmidt was talking about Google closing engineering offices in Phoenix and other locations; Google did have layoffs last winter.] You’re right:

What do you think about publishers requiring pay walls, and how will you help surface that.

Schmidt: We’re starting with that YouTube. Overall, “there’s clearly a market for free content, and that market is the size of the Internet.” Also a market for subscription/paid. The analogy I would offer is TV. We all grew up with “free” TV. Now almost everyone pays for cable, and some people pay for pay-per-view, “which is ridiculously expensive,” but people will pay for particular events, like boxing. I think all three of those uses will emerge. We’re working on payment models, subscriptions, to enable that.

But what about surfacing paid content in search [this comes from WSJ.com editor Alan Murray]? Will you factor the desire of someone to pay for content into results?

Schmidt: We’re not going to use the price you use as our ranking in results. That’s not going to be our signal. But we’ll incorporate the price people are paying for your content into results. But I’m not going to answer this precisely because I don’t want to discuss how we produce results. The most interesting improvement you could make is that to the degree that we have more of the marketplace data available, we could take that information and reflect some of that in our rankings.

The AP CEO said Google or Microsoft might be willing to pay a premium for an advance look at the news.

Schmidt: We have a deal with the AP, and I don’t want to talk about any specifics of any deal. I don’t think that’s proper. “We have to be very very careful not to favor one media organization over another, with regard to speed or latency.” We are staying out of the media business. “You guys are very good at it, and we’re not.”

[Apologies for tech error; I missed the specific question and part of the following exchange, but the subject is entitlement.]

Brin: We cut down on snacks, etc. to “reset expectations” regarding entitlement.

Schmidt: “Google pays very well. Google is clearly a growth company. People at Google don’t work for those reasons at Google. We don’t want them to come to work for Google for those reasons. We want people to come to Google to change the world. Life is short.” The tightening in the last year has been good for this, by the way, the controls put into place by Patrick Pichette, who is our hero, have been very helpful.

Please talk about M&A plans and goal of one acquisition per month.

Schmidt: That’s been our historic pattern. I think we will be buying small companies–five, ten people. That’s where some of our best stuff has been. One day Larry and Sergey bought Android, and I didn’t even notice. Think about the strategic opportunities that has created. Sergey found Google Earth one day while he was surfing on the Web. And then he walked into my office and told me he bought them. “And I said, ‘for how much, Sergey?’ And it turned out to be a few million.”

Would you buy a YouTube?

Schmidt: Is there another one to buy? The problem with that size of acquisition is that you have to make your money back. I think that DoubleClick and YouTube will be two of our best acquisitions. DoubleClick is already close to paying back, and YouTube will get there soon. But bear in mind that any major acquisition now will involve a regulatory review, because of our size and because our competitors will make sure of that.

[Sorry, missed another question]

Do you anticipate making large upfront commitments for new or renewed search deals [as you did with MySpace and AOL]?

Schmidt: I’d rather not comment on search deals. We are in discussions with both of those companies. “Some of our best friends are in those companies.”

[Missed yet another one]

What will new tablet machines [like Apple's] mean for you? And to content producers?

Brin: Hardware is getting amazing with regard to cost. Used to be that display was expensive. Now that’s cheap, and so are chips, etc. Now, the main cost is broadband connection, or cellular, or however you get to the Internet. That’s why wide broadband availability is important to us. Think about how much you spend on access costs compared to the amount you spend on your handset. The phone cost is negligible.

Schmidt: Not sure how to answer question. We provide the infrastructure below what you’re talking about [touch interfaces, etc.]. Kindle is a good example. Don’t think about current one, think about one two or three years out. I think there will be many kinds of things like Kindles, and that’s a material change in the way people will interact with hardware, media.

Brin: I think it’s better if hardware isn’t locked down to specific platforms.

[Long exchange between Schmidt and Danny Sullivan that I'll have to pick up later]

Should Google be required to lease servers and access to Google checkout numbers to deal with “lock-in” issues that broke up the telcos?

Schmidt: Google Checkout isn’t interesting. But I think your analogy is wrong and that there are no data to support your theses.

[I missed the next question on the book settlement about orphan works, etc.]

Schmidt: A lot of these complaints are being made by people who don’t want a solution.

What are the reasonable book settlement proposals you’ve seen?

Schmidt: Goal is to get all the books to everyone and to get all the authors compensated properly. Some of the proposals make sense to me, but I don’t want to characterize them. Not a perfect solution, but the best one we can do.

How will book settlement affect international users?

Brin: It won’t. We’d love settlements that work across a range of countries.

Why won’t you be like Microsoft with regard to antitrust?

Schmidt: Many reasons. Culture, for one. Another reason is that majority of users are one click away from moving away from us. Third: If we went into an “evil room” and had an “evil light” shined on us, and we then behaved in an “evil way” we would be destroyed….There is a fundamental trust between Google and its users.”

Schmidt walks through “ludicrous” thought experiment whereby Chrome takes 80 percent of market share and then tries to lock consumers in, noting that it wouldn’t work due to open source.

Do you think you’ll take another stab at moving into radio, print?

Brin: We are quite optimistic on the TV front. Radio and print didn’t pan out as well as we thought initially. One of the reasons is that those mediums are moving online and consumers are moving online and the publishers/producers want to work with us there. “We were kind of at the dock where the ship had already left.” But TV is quite similar to the Web in terms, potentially, of measurability, so we’re excited about those prospects.

Is page rank broken? People are gaming it, etc.

Brin: No. We have to continually develop. Part of the issue is span, but the main issue is that everything changes. We’re doing a much better job of ranking than we did a decade ago. If we just rested on our laurels with what we wrote in paper from 1998, we’d be in big trouble.

Is the newspaper advertising slump about to end? Nope. But it’s continuing to get a little bit less awful.

The New York Times polled some of the remaining analysts covering the industry, as well as people who actually work in it, and concluded that Q3 ad revenue will be down 25 percent, or “possibly a bit less.” Awful by any standard except those of this year: Q1 was down 28.3 percent and Q2 was 29 percent.

Worth noting, but not in a newsworthy way: We’ve been headed in this direction for a while. Publishers, including the New York Times (NYT), Gannett (GCI) and McClatchy (MNI), started making hopeful murmurs–or less hopeless murmurs, really–earlier this summer. But all they’re really saying is that:

• Things don’t seem to be getting any worse, and
• It’s nearly impossible for year-over-year comparisons not to improve for the rest of the year since results will be measured against those posted in the fall of 2008, when the economy was in shocked-and-awed mode. Which we knew. But still worth repeating, and something we’ll probably repeat many more times through the rest of this year.

First item: Results from Bernstein’s “Ad Tracker” index that show the rate of decline slowing in the last quarter. Bernstein figures overall ad spending dropped by 16.5 percent in Q2, which is lousy, but it’s still better than the 19.5 percent drop we saw in Q1. (Click chart to enlarge)

Second item: Bernstein thinks online ads are also going to start improving. In the chart below, see how the online ad dollars plummet, then plateau? In this economy, flat-lining like that is progress.

Even better, Bernstein predicts that the chart will start moving up, if just a bit, for the rest of the year. The firm predicts that sales will drop a mere four percent in the current quarter and be flat in the fourth quarter.

Granted, those numbers are against horrible comps, since the economy tanked in the second half of last year. And they’re not going to help everyone equally; for instance, Google (GOOG) is likely to recapture search dollars before Microsoft (MSFT) and Yahoo (YHOO) do. But progress is progress.

Estimates vary widely, but they’re all bad–as we thought they would be. Variety says ad agencies think the four broadcast networks–News Corp.’s (NWS) Fox, Disney’s (DIS) ABC, GE’s (GE) NBC and CBS (CBS)–plus the pint-sized CW, may have seen sales drop by 10 percent to 12 percent compared to last year. Ad Age thinks the decline could by as much as 15 percent. Mediaweek says sales are down a staggering 22 percent.

The other bit of consistency is the explanation for the drop, which is two-pronged: Sales are down both because the economy is bad and because the networks are offering less inventory than they normally would. They’re holding back lots of their spots in hopes of selling them at higher prices later in the year, presumably when the economy comes roaring back.

I’ll let bigger brains than mine handicap the odds of that happening (but for the record, you can color me skeptical). In the meantime, let’s see what depressed TV ad prices do to prices for Web video ads.

Last week, Gannett (GCI) said national ads had only dropped 12 percent in June, compared to a 24 percent slide the previous year. Yesterday, McClatchy (MNI) said that while ad revenue was down 30 percent in the last quarter, this figure was at least stable compared to the previous quarter, and that things were picking up, just a bit, this summer. And today Media General (MEG) said its declines had also become a bit less severe.

Tomorrow we hear from the New York Times (NYT), and if we use the the very low bar set by its peers, there’s a decent chance the publisher will have a not-terrible story to tell.

That’s because the Times had previously warned that its Q2 would look as unpleasant as its Q1, when its ad sales dropped 27 percent; anything less lousy will constitute a win. Investors seem eager to hear about it: NYT shares are trading up today along with many other newspaper publishers.

And again, be very wary of overvaluing these numbers, particularly as we get farther along into summer and fall. At that point, the comps will be measured against last year’s black hole of an economy, and any company that can’t show an improvement against that performance will likely be DOA.

Still. It’s a very nice day in New York, and newspapers deserve a shot of good news. Enjoy.

CEO Chuck Townsend said as much in a memo yesterday announcing that he’d hired McKinsey to figure out how to survive “in an emerging economy that is now predicted to be painfully slow in recovering.”

But when you see Condé’s projected numbers for its fall issues, which are traditionally bulging with ads, it’s even more startling. Particularly when you realize that the economy had already been slowing down a year ago (Disclosure: I do some free-lance work for Condé title Vanity Fair).

Take a look for yourself in the table below (click to enlarge): The numbers in the middle (faintly highlighted in blue) represent the year-over-year decline in ad pages, if you factor out the publisher’s special “Fashion Rocks” issues, which it gave up on last year. The more brutal numbers on the right are the “real” numbers. All of them are unpleasant.

Using the more favorable set of numbers, Teen Vogue is Condé’s relative star, down a mere 17 percent. And if Vogue was a publicly traded stock, it would have beaten expectations, since it came in above 400 pages–which is still down 29.7 percent (or more).

Not included the above chart: Totals for The New Yorker, Golf World, Modern Bride or Elegant Bride, since they aren’t monthlies and don’t have comparable September issues.

And here’s a trailer for “The September Issue,” a much-buzzed about documentary about Vogue’s effort to put out…well, you can figure it out.

Top line for Google’s Q2 earnings: Net revenue of $4.07 billion and earnings of $5.36. The Street was looking for net revenue of $4.05 billion and earnings of $5.05.

CEO Eric Schmidt isn’t overly effusive: “Google had a very good quarter, especially given the continued macro-economic downturn. While most of the world’s largest economies shrank, Google’s year-over-year revenues were up 3%. These results highlight the enduring strength of our business model and our responsible efforts to manage expenses in a way that puts us in a good position for the economic upturn, when it occurs.”

Meanwhile paid-click growth was up 15 percent, and the company continues to clamp down on expenses: Google’s headcount actually shrank in the last three months, from 20,164 to 19,786 full-time employees.

I’ll be listening in on the call and occasionally updating here.

• Schmidt: “Youtube is now on a trajectory we’re very pleased with.”
• “Too early to tell when the recovery will materialize.”
• CFO Patrick Pichette: Still hiring, but decrease in headcount came from previously announced layoffs.
• Product SVP Jonathan Rosenberg: We’re focusing more than ever on power users.
• Mobile monetization picked up, driven by smart phones. YouTube’s monetized views have tripled in the last year.
• Sales boss Nikesh Arora: Small advertisers have stayed consistent during downturn, and larger advertisers who have been on sidelines are coming back.
• Schmidt on Chrome OS: We’re talking to manufacturers about designing “products that are very, very exciting.” Will Chrome run on existing hardware? Available for download? Still to be worked out.
• Was June soft? Schmidt: We generally don’t parse interquarter trends. On YouTube: Monetizing “billions of views” per months. [Nothing approaching real numbers or real context].
• Arora: “Significant sellthrough” in markets where Google has YouTube homepage for sale. Next phase of YouTube sales emphasis will be preroll ads on short-form videos.
• Arora on YouTube “trajectory” comment: We’re excited about getting pieces in place to drive this forward [i.e., not talking about numbers]. Customers accepting YouTube ads: “It’s becoming accepted user behavior where they’re going to watch premium content that people have invested in, they’re going to watch pre-roll ads.”
• Is YouTube profitable? Pichette: We don’t give out economics. But in the not-too-distant future, we see it being very profitable.

Here again, per Citigroup’s Mark Mahaney, is a crib sheet for interpreting the results (click to enlarge):

And here are the slides from Google’s investor presentation:

2009Q2_google_earnings_slides –

A U.S. recovery is likely to begin this autumn, the worst of the crisis has passed and it is “reasonable to be optimistic for 2010,” internet search giant Google’s chief executive Eric Schmidt said on Friday.

Speaking at the Cannes Lions advertising festival in southern France, Schmidt said U.S. jobless claims indicated “the beginning of the bottom.” “The rate of jobless claims is decreasing although the absolute number is increasing,” he explained.

Schmidt also acknowledged that Microsoft’s (MSFT) Bing search engine exists and that his company has looked at what Redmond has done, but refused to say the company was shaking in its boots. Seems reasonable enough.

I’ll add more from Schmidt’s appearance if I can find reports, but I’m not holding my breath. AdWeek’s Brian Morrisey, reporting from France via Twitter, says Schmidt gave even more restrained answers than he typically does at these things.

So says Nielsen, via its newest “Three Screen Report.” The tracking service says more Americans are watching TV than ever before–up 1.2 percent in the last quarter–and they’re spending more time watching TV, too–that’s up 1.9 percent, to a staggering 153-plus hours per month. Of course, the same holds true for Web video, which is growing much faster.

Here’s how the data break down. Total number of viewers (click to enlarge):

Time spent viewing (click to enlarge):

Don’t be fooled: As much as the blogosphere likes to describe the TV guys as clueless dummies, they’re well aware that they’re now competing with the likes of Hulu and Google’s (GOOG) YouTube for their viewers’ time. That’s why Hulu, the JV between GE’s (GE) NBC, News Corp.’s (NWS) Fox, and now, Disney’s (DIS) ABC, remains such a controversial site within the industry–one camp thinks it’s the best way for the networks to position themselves against the eventual move to the Web, and the other thinks they’re hastening their own demise by training viewers to expect free, on-demand access via the Web.

We may get a slightly better sense of what advertisers think about this soon. It’s “upfront” week in New York, which means that all the broadcast networks–CBS (CBS), NBC, Fox and ABC have begun selling their wares to advertisers for next year. Prognosticators are betting that upfront sales could be down by 15 percent or so this year, but they’re assuming that most of that decrease has to do with the miserable economy, not a full-blown move–or “secular shift,” as the smart guys like to say–away from TV and to the Web. If that decrease gets much bigger though, it could mean something else is afoot.

Enough with the serious! Here’s the excellent celebrity singalong from the finale of “30 Rock,” which aired last week. NBC only allows Hulu to keep episodes of the show on the site for a limited time (expect to see more of this restriction, not less), so this may only work for a few weeks. Enjoy:

From The Wall Street Journal:

“Microsoft Corp. may re-evaluate its plans for job cuts, its chief executive said Tuesday, suggesting more reductions could be in store if the U.S. economic downturn worsens.

‘In case the situation gets dramatically worse in the U.S., we will have to rework’ our plan, Chief Executive Steve Ballmer said at a news conference without elaborating.”

Here’s one reason why Ballmer didn’t feel the need to elaborate: He said the exact same thing last week.

Here’s the quote, from a companywide memo distributed when Microsoft (MSFT) announced its second phase of mass layoffs:

“As we move forward, we will continue to closely monitor the impact of the economic downturn on the company and if necessary, take further actions on our cost structure including additional job eliminations.”

To reiterate: Ballmer, whose company has remained dour about the economy even as investors and other forecasters (like Rupert Murdoch) have shown more optimism, refuses to say he’s done firing people for the year. But he’s not saying he will fire more people. My hunch: If you ask him next week, he’ll say the same thing.

Portfolio’s ad pages were down more than 60 percent in the first quarter of 2009. If you account for the magazine’s decreased frequency–it published two issues in the first free months of the year, down down from three last year–that works out to be a 40 percent drop. Here’s how its peers performed during the same period, via the Magazine Publishers of America:

McGraw-Hill’s (MHP) BusinessWeek: Down 39.8 percent

Time Warner’s (TWX) Fortune: Down 26.3 percent

Privately held Forbes: Down 15 percent

Bear in mind that the revenue numbers for each title are likely down much more dramatically. That’s because the two categories of advertisers that the business magazines have depended on to fill their pages–financial services and autos–have all received extra-vicious beatings from the economy since last summer. So the publishers are particularly vulnerable to rate card pressure. And I’m told that luxury and travel advertisers, which had stayed relatively strong through the end of 2008, fell off dramatically this year. So that can’t be good.

My contribution to the aforementioned bone-picking: Like everyone else who wrote about Portfolio yesterday, I mentioned that the magazine and Web site had reportedly been launched with a budget of $100 million or more. But let’s be clear–that’s $100 million (or more), to be spent over a five-year period.

Portfolio was around for two years, and was gestating for a year before that, and a bunch of the budget was likely spent up front. So Condé Nast likely did burn through a very large pile of cash–the New York Times’s David Carr reports that the magazine spent $30,000 last fall to “procure the services of a real elephant to menace a model at a photo shoot.” And I’d love to know what the total actually was (for the record, I asked, and no one will tell me). But it’s a stretch to think Condé Nast actually burned through nine figures on this one.

But COO (and temporary CEO) Tim Cook’s dismissal of the netbook market will continue to spark speculation that the company is readying something that sits in between a laptop and an iPhone (which is itself a computer, of course). Silicon Alley Insider’s Dan Frommer got more of Cook’s response than I did so I’ll reprint his quote here:

“When I look at what is being sold in the netbook space today, I see cramped keyboards, terrible software, junky hardware, very small screens, and just not a consumer experience and not something we would put the Mac brand on. So it’s not a space–as it exists today–that we’re interested in, nor do we believe that customers in the long term would be interested in. That said, we do look at the space and are interested in how customers respond to it. People who want a small computer than does browsing and email might want to buy an iPod touch or iPhone. We play indirect basis. Then of course if we find a way where we can deliver an innovative product that really makes a contribution, then we’ll do that. We have some interesting ideas in this space.”

EARLIER:

Apple (AAPL) just turned in a strong quarter and followed it up with conservative guidance. A fairly typical performance for the company. Now investors will want to know about new product lines, Steve Jobs’s health and other matters. I’ll be covering the call live. Please refresh this page for the most current information. Click here if you want to listen in yourself.

Joining call now. Tim Cook CFO Peter Oppenheimer going over info that’s already in the release.

Mac products: 2.2 million Macs, a three percent decline year-to-year. Tough comparison from last year. But better than the seven percent drop in PC sales overall. “We feel very positive about our Mac performance.” Began and ended quarter with three-to-four weeks of Mac inventory.

iPod: People still buying ‘em! iPod touch selling well, and so are apps. Claims people like the new shuffle player. [Dubious about that]. We own the MP3 player market. [Duh.] Began and ended the quarter with four-to-six weeks of inventory.

iTunes store: 35,000 apps available in store, up from 15,000 a quarter ago. “We are within hours” of one billions app downloaded.

iPhones: Unless I’m missing something, absolutely no new data here. Praising new iPhone 0S 3.0 that’s in the works. Apple delayed the start of revenue recognition of all iPhones sold after the company announced the new OS, which was March 17. Will start up again once OS is released.

Stores: Half our Macs sold to people who had never owned one before. Average revenue per store is down year over year, because the economy is lousy.

Gross margins: Commodity and other component costs lower than expected. Higher-margin sales better are also than expected. Apple also spent less on operating expenses than expected.

Guidance: Forecasting is “challenging” in macroenvironment. Again, noting delay in revenue recognition for iPhones (see above). Excited about new products in pipeline, etc.

Q&A

Outlook for pricing on component supply? Mostly favorable, but some commodities, like NAND, will increase sequentially. Cook does not expect to see the level of reduction seen in calendar Q1. Will it be down? It will be “in a similar range as last quarter.”

Cash flow issues? Not really, for several reasons: 1) Apple made prepayment to…. [sorry, I didn't catch who that was]; 2) accounts payable were down, from holiday quarter to spring quarter, which is standard; 3) at $1.3 billion, tax payments were up “significantly” from last year.

Mac business: Desktops selling well, but average selling price down quite a bit. What’s going on? Sales accelerated in March after Apple announced new product launch. Higher-end Pro products sold to professionals are down a bit, which is related to economy for obvious reasons. Education sales also down a bit, for same reasons. Hoping Federal stimulus funds will help with that.

Back to netbooks–why won’t Apple sell them? Cook is still criticizing netbooks. The ones available today are ”just not a consumer experience and not something we would put the Mac brand on, quite frankly. It’s not a space today that we’re interested in, and it’s not a space we think that customers in the long-term are interested in.” But… a slight hedge with regard to smaller computers, which are, of course, what the iPhone and iPod Touch are. We “have interesting ideas in this space.” Today’s netbooks really shouldn’t even be called computers, really.

App store: What’s the mix between paid and free downloads and the iPod and iTouch mix? Nope. Apple won’t say. Again, Cook notes that we’re just “hours away” from the one billionth download. Cook: One of the keys behind the growth of iPod has been that sales of the iPod touch “more than doubled year-over-year.” The iPod and iPod Touch have reached sales of 37 million units, a big platform for developers. So there’s a virtuous cycle there.

[Sorry, missed two questions here.]

Why is Apple still doing an exclusive with AT&T for the iPhone? And how’s Steve Jobs? AT&T (T) is the best wireless provider in the U.S. “They have done a very good job with iPhone….We’re very happy with the relationship we have and do not intend to change it.” Structurally, we’re using GSM architecture, and Verizon (VZ) uses CDMA, and we wanted a world phone.

And Steve Jobs? Apple CFO Peter Oppenheimer: “We look forward to Steve returning to Apple at the end of June.” [Translation: No news.]

[Yet another question missing here. Apologies.]

Any info on DRM-free/”iTunes plus” sales? Too early to tell.

How much impact did Wal-Mart (WMT) have on Apple sales? Very key partner for the iPod. The company believes Wal-Mart provides extended reach. Pleased with results, but “early going, and not much to report there yet.”

So many iPhone Apps. How can you make them easier to find on iTunes? (Same problem as music.) Any kind of unusual patterns? Nonanswer here.

Please talk about competition for smartphones–i.e., please discuss the Palm (PALM) Pre. “Difficult to comment on products that aren’t shipping. So there’s nothing intelligent I could say on the Pre.” But “we think we’re years ahead.” We see things through software lens and that has benefited us and customers very well. Power of device and ecosystem enormous and we’re now just scratching the surface.”

What about suing Palm re: patents on the Pre, etc.? “We think that Apple’s innovation is leading the industry by years. We think competition is great; we think it makes all of us better as long as other companies invent their own stuff.”

After Armstrong, who was Google’s best-known sales exec but not its highest-ranking, left, Arora was supposed to be a candidate for his job. But that post, or a version of it, went to company veteran Dennis Woodside.

Here’s the text of the announcement, buried at the bottom of Google’s earnings report:

“After ten years of building and managing our global sales and partnership operations, Omid Kordestani has decided to hand over the reins to Nikesh Arora, currently President of International Operations, and take on a new role as Senior Advisor, Office of the CEO and Founders. Continued growth is essential to our future success and no one is better placed to advise on new revenue opportunities than Omid, the business founder of Google. In his new role as President, Global Sales Operations and Business Development, Nikesh Arora will have responsibility for all Google’s revenue and customer operations, as well as marketing and partnerships. He has a proven track record at Google, having spent the last four and a half years building our European operations into a substantial business.”

Google (GOOG) points out that Kordestani’s new position will be a full-time job and will report directly to CEO Eric Schmidt. And during the company’s earnings call, Schmidt took pains to both praise Kordestani, who was on the call, and repeatedly refer questions to him.

Still, the move is bound to bring up the question: Is Kordestani being blamed in any way for the sales slowdown at Google? During the call, Schmidt argued (quite sensibly) that sales were down because the economy was down. But Google also just let go of 200 of sales people, after Kordestani explained that “When companies grow that quickly it’s almost impossible to get everything right–and we certainly didn’t.”