October 19, 2006 2:28 PM PDT

Google profit nearly doubles

Google's third-quarter profit nearly doubled from a year ago as sales of keyword-related advertising continued to grow for the world's top Web search engine.

"Business is very, very good here at Google. We had an excellent quarter in all respects, especially in international," Google Chief Executive Eric Schmidt said in a conference call Thursday after the results were released.

During the quarter, Google saw strong user growth and improvements in search quality and ad sales, Schmidt said.

The news sent Google's stock up shares rising nearly 8 percent to $459.51 in after-hours trade, after closing at $426.06. The earnings announcement was made right after the market closed.

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Google Q3 profit nearly doubles CEO Eric Schmidt cites strong ad sales and growth in international business

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Net earnings for the quarter ended Sept. 30 were $733 million, or $2.36 a share, including one-time items such as stock-based compensation, compared with $381.2 million, or $1.32 a share. Excluding those items, earnings were $812 million, or $2.62 a share.

Total revenue for the third quarter rose 70 percent to $2.69 billion, compared to $1.58 billion a year ago. Excluding traffic acquisition costs, or commissions paid to content partners, revenue was $1.87 billion.

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Google and YouTube to follow the law on copyright CEO Eric Schmidt says he is not concerned about violating the Digital Millennium Copyright Act Google

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Analysts polled by Thomson Financial were expecting Google to post earnings per share of $2.42 excluding items, and revenue of $1.81 billion excluding traffic acquisition costs.

Paid search represents nearly all of Google's revenue.

Last week, at the start of the fourth quarter, Google sent shock waves through the industry when it said was purchasing popular video-sharing site YouTube for $1.65 billion in stock.

"We're relying on the Digital Millennium Copyright Act as it is being imposed by law. There are not a lot of shades of gray in how it works," he said. "If you operate under this, companies have safe harbor. We do our very best to implement it as it is prescribed...It's the law of the land and we absolutely operate by it."

On Tuesday, Yahoo reported disappointing third-quarter results. Ranked second in Web search, Yahoo cited lower than expected ad sales from some of its large advertisers, in posting net income that dropped by nearly a third from a year ago. To offset the bad news, Yahoo said its delayed search advertising platform "Panama" was finally live.

It was the latest, and biggest, of a series of deals Google has made recently, including one in August with News Corp.'s MySpace. Google guaranteed it would pay $900 million over three years in exchange for being the provider of Web search and advertising listings on the popular social network.

Schmidt said the YouTube deal represented "the ultimate partnership." Schmidt was asked by an analyst during a question-and-answer session whether he was concerned about YouTube being sued by big media companies over copyright violations because users have been known to post TV and other content without permission.

Google has about 44 percent of the U.S. search market share, up from 37 percent a year ago, while Yahoo's market share has declined to 28.7 percent from nearly 30 percent a year earlier, based on Internet users, according to ComScore.

Nielsen/NetRatings says Google accounts for half of all Web searches in the U.S.

Not only does Google receive more Web searches and more search users, but it is able to make money from those searches much better than its closest rival.

Google's U.S. ad revenue growth rate is expected to rise nearly 65 percent from last year, while Yahoo's will grow only 17.5 percent, according to eMarketer. Google will garner one-quarter of the U.S. Internet ad revenue as opposed to the 18 percent Yahoo is expected to pocket.

Mark Mahaney, an analyst at Citigroup, praised Google's results, saying they were "extremely strong, indicating a still robust search market, market share gains, and excellent execution."

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8 comments

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Watch out for this not-for-profit-search engine
I guess the Advertisers on Google, let alone their share holders, have not heard of this new search engine called AnooX.
Anoox is a not-for-profit search engine, therefor the cost of Ads on it are like 90% less than Google or Yahoo. Oooouch.
I know, cause we advertise on Anoox.
I fact since we started advertising on them in early March we have increased our sales by like 30% while cutting our search engine Advertising
costs by like 80%.
Now why doesnt the Big media cover Anoox and they keep hyping Google? Could be that Big media interest have Tons of Google share and dont like
the fact that Anoox is a not-for-profit-search engine which means good for bottom line of small businesses but bad for share prices of over hyped
search engines like Google & Yahoo.
Food for thought!
Check anoox out at www.anoox.com and you see what I mean.
Posted by Sandra_Kerns (25 comments )
Reply Link Flag
Nice plug there.
No one advertises on Anoox because no one uses Anoox. We tried advertising thru ExactSeek/Jayde Online because their ads ran on over 100 search engines. But guess what? No one uses these search engines, hence, no traffic to ads and no sales. We gave up on that because 90% of Internet searchers use Google/Yahoo/MSN. It is simple as that. We registered thru Anoox because it was free but there is no way we would pay money to advertise there, non-profit or profit. But that's a nice little plug you posted anyway.
Posted by ebeamsales (36 comments )
Link Flag
You again
So what is your business anyway? You constantly say that you are a "small business owner", but offer no further clues.

I gave you a chance, and I regretted it. Most of the searches didn't give good results even on page 5. How can someone vote for something if it doesn't appear? What did I look for? My company, me, and several other random searches. "Lego Crane" was a good one; 1 return about lego and 14 random others, including one for a porn site. Useless. Absolutly useless. "MASM" was better (but not good), but "Apollo 11" was the worst. Not one site to do with the moon landing, even on page 2!

As for being "not for profit", why do you have to pay;

A $300 processing fee
10% of all profits
$7500 for support per server

...before you recieve the source code. Where does this money go?

<a class="jive-link-external" href="http://www.anoox.com/open-source-overview.jsp" target="_newWindow">http://www.anoox.com/open-source-overview.jsp</a>
Posted by Andrew J Glina (1673 comments )
Link Flag
Screwing their Advertisers...
Being a Google PPC advertiser myself, I can attest to the fact that the reason why Google's profit jumped is because of the changes in their ranking algorithms over the last few months. We were using Google AdWords very effectively for several months until they impliemented the "quality score" algorithms and since then, their "requirements" to even show our ads in search results have been replaced by an extortion scheme designed to yank more money out of advertisers. I am not talking about click fraud here. I am talking about Google's deliberate abuse their #1 dominance in the search industry to drive up advertising costs to their advertisers. For example, we were receiving terrific click-thru rates (and subsequent sales) on several ads. CTR was 5-7%, which is very good. We were paying 50 cents/click. Then after a few days, Google raised the minimum bid to $1.00/click or they wouldn't show our ads. They cited a poor quality score on our landing page, which obviously wasn't affecting our click-thru rate or sales. This is the very definition of extortion. But what are we to do? Switch to Yahoo Search Marketing? Are you kidding? They're system is down half the time and their interface is poorly designed, inefficent, and klunky. There is no mystery why Yahoo is a distant #2. What's even worse about Google, is they don't even tell you how you are supposed to comply with their new "quality score" search requirements. They give you a very vague outline, but no firm set of conditions that you can adjust your ads to to meet their criteria. So much for "do not evil".
Posted by ebeamsales (36 comments )
Reply Link Flag
My point exactly
The gripes you list about Google Advertising is exactly the same that we had with them.
They just change their Paid Listing mechanisms as they like and Damn the Advertisers.
They figure what are we going to do, not use them.
So they just screw their Advertisers as they want, that is as you noted engage in extortion by bidding up the Ad prices higher and higher.

To put another way, the more Google profits go higher, the more they ae screwing their small business Advertisers, the more they are taking money out of our pocket and moving it into theirs.
So every time you hear Google increased profits, equate that to tons of small businesses having gone out of business or having had spent much more money on search engine advertising.

Now it used to be that we had no choice and just had to take the Google extortionist Ad sales practices in the chin, but THANX GOD we now have a real choice which is the Anoox search engine. For us we have moved a good part of our Ad budget from Google &#38; Yahoo to ANoox and have never been happier. I just feel so sorry for the poor schmucks who still do not know of Anoox and keep thinking Google &#38; Yahoo are the only choices. They are not. Try anoox (www.anoox.com) and you will also know how good their service is and how low &#38; fair their Advertising prices and methods are.
Posted by Sandra_Kerns (25 comments )
Link Flag
Screwing their Advertisers...
Being a Google PPC advertiser myself, I can attest to the fact that the reason why Google's profit jumped is because of the changes in their ranking algorithms over the last few months. We were using Google AdWords very effectively for several months until they impliemented the "quality score" algorithms and since then, their "requirements" to even show our ads in search results have been replaced by an extortion scheme designed to yank more money out of advertisers. I am not talking about click fraud here. I am talking about Google's deliberate abuse their #1 dominance in the search industry to drive up advertising costs to their advertisers. For example, we were receiving terrific click-thru rates (and subsequent sales) on several ads. CTR was 5-7%, which is very good. We were paying 50 cents/click. Then after a few days, Google raised the minimum bid to $1.00/click or they wouldn't show our ads. They cited a poor quality score on our landing page, which obviously wasn't affecting our click-thru rate or sales. This is the very definition of extortion. But what are we to do? Switch to Yahoo Search Marketing? Are you kidding? They're system is down half the time and their interface is poorly designed, inefficent, and klunky. There is no mystery why Yahoo is a distant #2. What's even worse about Google, is they don't even tell you how you are supposed to comply with their new "quality score" search requirements. They give you a very vague outline, but no firm set of conditions that you can adjust your ads to to meet their criteria. So much for "do not evil".
Posted by ebeamsales (36 comments )
Reply Link Flag
The next Enron?
I can't help thinking that these numbers just look too good to be true...
IB
Posted by InnocentBystander (7 comments )
Reply Link Flag
The next Enron?
I can only hope so. One thing I've noticed they do is not recraw pages that have been changed in any timely fashion. I know this from first hand experience. We're not talking days. We're talking months and months.

I'm sure there's some reason for it. I can only imagine it's a profit motive.

Charles R. Whealton
Charles Whealton @ pleasedontspam.com
Posted by chuck_whealton (521 comments )
Link Flag
 

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