Google revenue climbs, meets expectations

In what could be a positive sign for online advertising, Google said on Thursday that its second-quarter revenue rose from a year ago as ad spending in certain areas recovered and the company did well at managing expenses.

In what it termed "a very good quarter," Google posted revenue of $4.07 billion for the second quarter, excluding commissions paid to advertisers, up from a year ago and a smidge higher than analyst estimates.

In a conference call, Google Chief Executive Eric Schmidt said he was very pleased with the results the company posted as the economy struggles to recover. "It demonstrates our resilience in what continues to be a very difficult environment," he said. "Google's business appears to have stabilized," as consumers turned to the Web to find the best deals and ad sales were strong.

Schmidt said he couldn't forecast when the economy would improve.

"It's too early for us to tell when the recovery will materialize...A quarter ago, we had no idea where the bottom was," he said. "It became clear starting roughly at Christmas that people were spending more time searching and when they were purchasing products they were purchasing products of less value."

Ad spending, meanwhile, is returning, particularly in verticals such as shopping and travel, but not for financial companies yet. "We're not, at the moment, looking at the downward spiral we thought we would see six months ago," he said.

Revenue for the quarter ended June 30 was $5.52 billion, including traffic acquisition costs, up 3 percent from a year go. Traffic acquisition costs paid to advertisers were $1.45 billion, representing 27 percent of ad revenues. Excluding those commission, net revenue was $4.1 billion.

"It demonstrates our resilience in what continues to be a very difficult environment...Google's business appears to have stabilized,"

--Eric Schmidt, Google CEO

Net income was $1.48 billion, or earnings per share of $4.66, compared to $1.25 billion and $3.92 a share, a year ago. Excluding certain items, Google's earnings were $5.36 a share.

On average, analysts surveyed by Thomson Reuters had expected revenue excluding commissions to be $4.06 billion and earnings per share of $5.09.

The second quarter is typically a slower quarter because of reduced business activity during the summer, said Chief Financial Officer Patrick Pichette.

Aggregate paid clicks on ads served by Google rose 15 percent from a year ago, but were down 2 percent from the first quarter, while the average cost-per-click dropped 13 percent from a year ago and rose 5 percent from the first quarter. Traffic acquisition costs, or advertiser commissions, were down from a year ago.

The company has 65 percent of the search market, according to ComScore, followed by Yahoo with 19.6 percent, and Microsoft with 8.4 percent.

YouTube is starting to pay off, according to Nikesh Arora, president of global sales operations and business development. Google is making money off billions of videos every month, with monetizable views tripling from a year ago, he said.

"We're really pleased with the trajectory" and revenue growth (for YouTube), he said. "And in the (near) future, we see profitable business."

Google has about 20,000 full-time employees, down 375 from the end of the first quarter, mostly from a reduction in sales and marketing positions that was announced last quarter, Pichette said.

Google's revenue figures apparently didn't please Wall Street--Google's shares were down nearly 3 percent in after-hours trade, to $429.65.

This post was updated at 2:30 p.m. PDT with more details and at 2 p.m. PDT with comments from company's conference call.

[MaggieRed]

Seems a bit contrary to this story just posted:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAfStfOQoeQ8

[drezjohnson]

I think this is just a case of two different media outlets putting complete opposite spins on this story. Bloomberg seems to put a damper on the fact that the company has actually experienced growth in revenue. Sure a 3 percent growth rate is not an eye catcher, but given the state of the U.S. and the world economy in general, I think any growth is a positive and not the "Google is in trouble" spin that Bloomberg manages to put on the article. Cutting back on expenses and cutting a whopping 1% of their workforce seems like a responsible attempt to be more efficient and actually plan for the future. Personally, what I took from the Bloomberg article is that here we have a company that isn't arrogant enough to think that they can continue to be inefficient just because they are still growing. The are planning for the times and I commend them for now waiting until they are in the red before attempting to do so.

[FutureGuy]

@drezjohnson if anyone would spin this story it would be CNet, I don't think there are too many fanboys at Bloomberg. Moreover if this was great results it the share price would go down 3% after already been beaten badly in the last few months (the market as a whole went up a little over 1%) So it does appear its CNet and you trying to spin it.

[renGek]

If you read quarterly report reviews as often as I have you will know that basically these writers never agree with each other. Sometimes it seems one goes out of their way to contradict the other. It makes no sense and you are not suppose to take any one article at face value and get the whole picture. I don't find either of these articles as well written in terms of financial content as the associated press's take.
http://finance.yahoo.com/news/Googles-slowing-ad-sales-apf-1154268564.html?x=0&.v=3

[monkeyfun14]

Well TBH Google Chrome probably helped them a bit.

[jessiethe3rd]

Not particularly true - Bloomberg and various other sources are reporting this isn't all rosey as Google looks to ways to cut OpEx (operational expenses) to couteract it's slowing ad revenue business. I wouldn't call this all beautiful.

Some facts:
This represents only 3% growth - investors are not happy sending the stock down 3.4%
2/3rds of Google's business came from ad revenue (no diversity at all)
Google cut 80% of its CapEx projects to shore up the poor performance
Google cut 200 jobs in sales to help bolster their high OpEx

[InScotts]

Why would Elinor Mills, whom covers "Internet security and Privacy...for CNET since 2005", be covering financial reporting??

Anyhow, this story is a big nothing as Elinor has basically regurgitated what the financial press has covered.