July 19, 2007 1:32 PM PDT

Wall Street pouts after Google earnings

Google's second-quarter revenue rose 58 percent from a year ago on continued strong search advertising sales, while profits rose 28 percent, slightly lower than analyst expectations.

Shares of Google fell about 7 percent to $507.60 in after-hours trading Thursday, likely because of its income results slightly missing analyst expectations. In regular trading, the stock closed at $548.59, down 91 cents.

Google's earnings, announced Thursday, are in sharp contrast to those reported by rival Yahoo two days ago. Yahoo saw earnings drop from a year ago on slowing growth in its display advertising business and warned that revenue for the remainder of the year would be lower than expected.

Google's net income for the quarter was $925 million, or $2.93 a share, up from $721 million, or $2.33 a share, a year earlier. Excluding one-time items such as employee stock-based compensation, income was $3.56 a share. Analysts polled by Thomson Financial were expecting income of $3.59 a share excluding items.

Total revenue reached a new high of $3.87 billion. That was up 58 percent compared with $2.46 billion for the same period a year ago. Excluding traffic acquisition costs, or commission paid to content partners, revenue was $2.72 billion, greater than the $2.68 billion analysts were expecting. Google paid $1.15 billion in traffic acquisition costs.

Most of Google's revenue comes from search advertising. The company is looking to expand more in display advertising with its proposed $3.1 billion acquisition of online ad company DoubleClick. That acquisition is being challenged on antitrust grounds by companies like Microsoft and AT&T. The Federal Trade Commission is investigating the proposed deal. In addition, consumer and privacy groups have complained that it would give Google access to too much consumer data and pose privacy concerns.

Google is also diversifying its advertising to the offline world. Its online automated system is being used to sell ad space in radio stations and newspapers around the country. The company expanded its Print Ads program for newspapers this week.

Yahoo underwent a management shakeup last month and promoted co-founder Jerry Yang to replace Terry Semel as chief executive. The company has been struggling to compete against Google.

Google has a 52.7 percent share of the search market in the U.S., compared with Yahoo's 20.2 percent and Microsoft's 13.3 percent, according to Nielsen/NetRatings. Research firm eMarketer predicts that Google's U.S. ad revenue will rise by 45 percent this year from a year ago while Yahoo's will fall by 18 percent. Google's stock, meanwhile, has risen about 40 percent over the past year.

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earnings, traffic acquisition cost, Google Inc., Internet search advertising, Wall Street

4 comments

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Google misses, but is there pouting?
Google did indeed come up with a miss today, but do we consider the Street to really be pouting after hours?
For more consideration click here:
<a class="jive-link-external" href="http://sneakybusiness.typepad.com/sneaky/2007/07/google-misses-s.html" target="_newWindow">http://sneakybusiness.typepad.com/sneaky/2007/07/google-misses-s.html</a>
Posted by DayNovo (6 comments )
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Yes, we do
Without following your link, we can safely answer YES. No need for the link at all.
Posted by KTLA_knew (385 comments )
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Good to see, but
Great to see Google doing so well, i just hope they keep the passion and heart that has made their products so good.
Posted by Neville Bartos (34 comments )
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Some clown. . .
Some clown in a cubicle guesses wrong, and Google's (or any company's) stock falls. What a system.

When people guess wrong in Vegas, they don't call them an analyst. The correct term is loser.
Posted by rcrusoe (1305 comments )
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