Google Delivers Solid Earnings On Ad Sales - InformationWeek
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Google Delivers Solid Earnings On Ad Sales

Revenue from AdSense continues Google's momentum as the company looks forward to acquiring DoubleClick.

Google Inc. on Thursday reported $3.66 billion revenue for the quarter that ended March 31, 2007, up 63% year over year, and 14% from its previous quarter. Traffic acquisition costs during this quarter came to $1.13 billion, or 31% of advertising revenues.

"We are ecstatic about our financial results from this quarter," Eric Schmidt, CEO of Google, said during a conference call for investors. "Our core business at Google remains very strong and continues to grow."

GAAP earnings-per-share for the quarter was $3.18 on 315 million diluted shares, compared to $3.29 for the fourth quarter of 2006 on 313 million diluted shares outstanding. Non-GAAP earnings-per-share for the quarter was $3.68, compared to $3.18 in the fourth quarter of 2006.

"The global growth of our core search and ads business and our focus on building our partnerships drove our strong results in the quarter," Schmidt said in a statement. "We continued to expand our worldwide footprint, adding important new partners and growing our platform to increase our ability to deliver targeted and measurable ads. The ongoing expansion of our network allows us to improve the user experience through new opportunities and programs."

Schmidt told investors that U.S. growth was good and international growth was even better. "The global growth strategy of Google continues to work very, very well," he said.

Schmidt attributed some of the company's success to people thinking more creatively about monetization opportunities. He said the company was continuing to invest in data centers, engineering, sales, and support.

Asked about declining revenue per employee as Google grows its headcount, Schmidt said the company was not focused on that particular metric as much as user happiness. The addition of non-revenue generating employees such as those dealing with international user support contributed to user happiness, he suggested.

Google said that revenue from its online properties had risen 76% year-over-year and 15% sequentially, driven primarily by visitor traffic.

Google-owned sites generated $2.28 billion, or 62% of total revenue. Revenue generated on Google's partner sites, through AdSense programs, accounted for $1.35 billion, or 37% of total revenue, a 45% increase over the comparable revenue generated in the same quarter last year.

Google's results appear to be consistent with the 85% growth the company has seen in the number of sponsored link impressions on the Google ad platform. In Q1 2006, Google served 122 billion ads, according to Nielsen//NetRatings. In Q1 2007, that figure reached 226 billion.

Google's Web traffic grew 20% from Q1 2006 to Q1 2007, based on a three month average provided by Nielsen//NetRatings. In Q1 2006, Google's online properties drew a monthly unique audience of 93 million in the U.S. In Q1 2007, that figure reached 111.7 million.

Compared to Yahoo Search and MSN/Windows Live Search, Google Search showed the most year-over-year growth. Google Search processed 3.6 billion searches in February 2007, a 40% increase from 2.56 billion searches in February 2006, according to Nielsen//NetRatings. During the same period, Yahoo Search processed 1.33 billion searches, a 12% increase from 1.19 billion searches a year earlier. And MSN/Windows Live Search processed 618 million searches, up 9% from 566 million.

Figures released last week by another Internet metrics company, Hitwise, showed Google gaining search market share and its competitors declining. According to numbers provided by Hitwise, Google accounted for 64 percent of all U.S. in March 2007, up from 58% in March 2006. Yahoo Search, MSN Search and Ask accounted for 22% (-1 percentage point), 9% (-4 percentage points) and 3% (-0.5 percentage points) respectively.

Yahoo reported an 11% decline in quarterly profit earlier this week.

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