Google tops earnings, revenue expectations

Google topped Wall Street's expectations in its first quarter results, with revenue of $US2.53 billion, excluding special charges

Google has reported earnings and revenue that exceeded Wall Street's expectations for its first fiscal quarter, ended March 31.

Google reported revenue of $US3.66 billion, up 63 per cent compared to the first quarter of 2006. Deducting the commissions it pays to its advertising partners, Google's revenue was $US2.53 billion, topping the $US2.49 billion consensus expectation from financial analysts polled by Thomson Financial.

Net income came in at $US1 billion, or $US3.18 per share, compared with $US592.3 million, or $US1.95 per share, in last year's first quarter. On a pro forma basis, which excludes certain items, net income was $US1.16 billion, or $US3.68 per share, exceeding the analysts' $US3.30 earnings per share consensus expectation.

Google CEO, Eric Schmidt, declared himself ecstatic with the quarter's performance. "I'm very impressed that the global growth strategy of Google continues to work very well," he said during a conference call to discuss the results.

Schmidt drew attention to the company's core business: the contextually relevant, pay-per-click ads it delivers in its search results and partner sites. While Google's new products and ventures get a lot of attention, the core search ad business was often overlooked in discussions about the company, he said.

"We're still at the beginning of that business. A lot of people have said that maybe this isn't such a big business. It's a huge business, and we have a lot of room to grow there," Schmidt said. Google runs the world's most popular search engine.

As they have done since Google announced its intention to acquire online ad company DoubleClick, executives reiterated that the $3.1 billion acquisition will complement Google's ad business by boosting its ability to sell display advertising, a weak spot so far.

Schmidt also clarified that, contrary to recent press reports, Google isn't building a system to filter out and block pirated videos in its YouTube video sharing site. Instead, Google's upcoming Claim your Content tool would help to "somewhat automate" the process through which content owners flagged illegally copied videos so that Google could take them down from the site, Schmidt said.

"It's not a filtering system. The technology doesn't block uploads," he said. "It makes it much more effective and quicker to get us to remove inappropriately uploaded content. It's very much compliant with the DMCA."

Schmidt's comments would indicate that users will still be able to upload whatever they choose to YouTube, while keeping the corrective action purely after the fact and putting the onus on Google and the content owners to identify and remove videos. Google faces a $1 billion copyright infringement lawsuit by Viacom over the inclusion of Viacom videos on YouTube without permission.

Google-owned sites generated revenue of $US2.28 billion, or 62 per cent of total revenues, while advertising partners generated $US1.35 billion.

Revenue from outside of the US represented 47 per cent of total revenue, up from 42 per cent in last year's first quarter.

Paid clicks on Google sites and in ad network partner sites increased about 52 per cent over the first quarter of 2006.

Headcount increased worldwide to 12,238 full-time employees as of March 31, up from 10,674 full time employees as of December 31, 2006, Google said.

By contrast, Google's rival, Yahoo, reported disappointing financial results this week, and its stock subsequently took a hit from which it hasn't recovered, as investor confidence dropped regarding Yahoo's ability to energise its search ad business with its new Project Panama system.

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Juan Carlos Perez

IDG News Service
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