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Google's U.S. paid click-through rate posted a strong performance in the month of April, while Yahoo and Microsoft gave up ground, according to figures released late Wednesday by ComScore.

Google's paid click-through rate climbed 20 percent in April, compared with year ago figures, marking its best performance since November, according to a research note by Ben Schachter, a UBS analyst.

Yahoo, meanwhile, saw a year-over-year decline of 4 percent and Microsoft's MSN saw a drop of 9 percent.

And on the click-through rate, which takes the total number of searches divided by the sponsored clicks, Google's rate fell slightly in April to 10.5 percent, compared with 10.9 percent in the previous month. Yahoo posted a 12.5 percent click-through rate for April, verses 13.2 percent a month earlier. Microsoft, however, noticed a slight increase to 10.3 percent in April, compared with 10.2 percent, in the previous month.

"Paid click data released from ComScore is a positive read-through for Google's second quarter," Schachter said in his report. Shares of Google were up 2.91 percent in late morning trading to $584.80 a share.

Meanwhile, Google's coverage rate, which takes into account the percentage of search pages delivered with at least one paid ad on them, fell to 44.1 percent in April, compared with 45.5 percent in March.

"With fewer advertisements and more paid clicks, it appears that Google's advertising relevancy initiative is beginning to work," analysts Clay and Fred Moran of the Stanford Group stated in their research report.

Google's relevancy initiative aims to reduce the number of advertisements that appear on the right side of its search results, yet make the advertisements that it does carry target the desired audience with greater accuracy. As a result, Google hopes to charge a higher cost per click.

The coverage rate for Yahoo also fell in April to 69.4 percent from 70 percent in March, while Microsoft's MSN dropped to 63.8 percent in April from 65.5 percent.

In sizing up Yahoo, the Stanford Group stated: "Overall, there was nothing to get excited about for Yahoo...Queries also fell on a year-over-year basis, down 3 percent, suggesting that any initial year boost from Panama (has) tapered off as the company continues to struggle to maintain share in the market place."

Google and Microsoft, however, both posted double-digit increases in Web search queries. Google posted a 33 percent year-over-year increase in April, while Microsoft's MSN climbed 22 percent, compared with the previous year.

ComScore, an analyst firm left holding the bag when Google's financial performance far exceeded analyst expectations, scrambled Friday to reconcile its pessimistic statistics with reality.

At the heart of the matter is a key Google advertising performance measurement called paid clicks--the number of times Web searchers clicked on one of the ads Google shows alongside search results. On Tuesday, ComScore reported Google's paid clicks grew 1.8 percent from the first quarter of 2007 to the same period in 2008. But on Thursday, Google said the growth actually was 20 percent.

The gap prompted Google Chief Executive Eric Schmidt to jab at ComScore on the post-announcement conference call. "Paid-click growth is much higher than has been speculated by third parties," he said. ComScore's stock dropped 8 percent in after-hours trading Thursday, but recovered most of those losses Friday.

Why were the numbers so different? Two major factors, according to a blog post Friday by ComScore's Andrew Lipsman.

First and most obvious, Google's 20 percent statistic was for the whole world, but ComScore was only measuring U.S. results, Lipsman said. (Collins Stewart analyst Sandeep Aggarwal said after Google reported results that paid clicks in the U.S. were up 10 percent.)

Second, Google includes clicks through its AdSense service, in which partner Web sites display Google ads and share resulting revenue, Lipsman said. He also said "strong revenue growth" from YouTube contributed to the difference and concluded that ComScore and Google actually were not that far off at all.

After walking readers through some math, Lipsman launched into the disclaimers.

"ComScore has always cautioned that there are multiple factors that needed to be considered when projecting Google's earnings this quarter," he said. "U.S. paid clicks alone would not tell the full story without considering cost-per-click increases, that macroeconomic factors did not appear to be weighing on Google, and that Google might well have solid revenue growth in the first quarter."

He tossed in a pointer to a February blog post by ComScore Chief Executive Magid Abraham and search Senior Vice Preisdent James Lamberti who tried to moderate the minor panic that ensued after ComScore released its January statistics.

Even if you don't understand ComScore's numeric analysis and don't like the disclaimers, there's one part you should definitely remember from Lipsman's post: Google's opacity places huge importance on ComScore's numbers.

So know what you're getting into before you use them as a basis to play the market.

Google topped pessimistic Wall Street profit expectations Thursday, reporting a net income increase of 31 percent to $1.31 billion for its most recent quarter.

Excluding various items, that meant earnings per share of $4.84, well above the $4.52 expected on average by analysts surveyed by Thomson Financial. Revenue, which benefited an "immaterial" amount from the acquisition of DoubleClick, was $5.2 billion in the quarter ended March 31, compared with $3.7 billion for the same period a year earlier, the company said.

Excluding $1.49 billion in partner commissions called traffic acquisition costs, Google's revenue was $3.7 billion. That result was 46 percent greater than the year-earlier amount and about $100 million more than the $3.6 billion analysts expected.

The company's stock surged more than $76, or 17 percent, to $525 in after-hours trading. That's a significant step back toward the company's all-time high of $747.24 in November.

"Our ongoing innovation in search, ads, and apps (online applications) helped drive healthy growth globally across our product lines, yielding another strong quarter for Google," said Google Chief Executive Eric Schmidt in a statement.

The report comes amid fears that an economic slowdown or recession could be hurting Google's paid-click results, the number of text ads that Web searchers click on.

Recession-proof? So far
Schmidt essentially called those fears baseless.

"It's clear to us that we're well positioned for 2008 and beyond, regardless of the business environment that we find ourselves surrounded by," Schmidt said on a conference call. "We've looked at this really carefully, and we do not see an impact as of this time."

And if economic conditions do deteriorate, Google expects to weather the storm fine, Schmidt added. "Our conclusion is we're well positioned should economics change. We continue to do well because our model is so targeted, and targeted (advertising) does well in most scenarios," he said.

Google's text ads are geared to correspond to search results, presenting ads at what the company calls the "magic moment" when a person's search can indicate interest in a specific subject.

Google has been concentrating on showing fewer ads but making them better-suited to search results, a move it hopes increases the revenue generated by each click. But statistics from ComScore released this week show that compared with the fourth quarter of 2007, paid-click growth slowed in the first quarter for Google and Yahoo and that paid clicks flat-out declined for Microsoft's MSN.

Paid-click growth
Last quarter, Google's financial performance fell short of Wall Street expectations, triggering fears that economic woes might be hurting the company. Schmidt pooh-poohed the idea, at least for that quarter, by saying: "We have not yet seen any negative impact from rumors of future recessions. We'll see what happens."

Google said paid clicks increased 20 percent over the first quarter of 2007 and 4 percent over the fourth quarter of 2007.

Google and ComScore use different methods to measure paid clicks--for example, Google reports global numbers compared to U.S. tallies from ComScore--so it's not possible to directly compare Google's 20 percent quarter-over-quarter increase to the 1.8 percent increase ComScore reported for Google for the same period.

But Schmidt was willing to take a potshot, at least indirectly: "Paid-click growth is much higher than has been speculated by third parties," Schmidt said.

Google kept expenses down to $1.5 billion for the quarter. "We've had good, disciplined management of our operating expenses," Schmidt said.

The Mountain View, Calif.-based company kept hiring down to a mere 800, excluding the 1,500 that arrived with DoubleClick. Total head count now is 19,156, Chief Financial Officer George Reyes said. Google cut DoubleClick's staff by about 10 percent after the acquisition, and "an additional 15 percent, approximately, are expected to leave the company in the U.S. in the near to intermediate term because they are in a transitional role as they move through the system," Reyes said.

New ad frontiers
Google executives had optimistic words for a variety of expansion plans:

• In China, Google lags Baidu.com as the top search engine but hopes to take the lead within five years. Schmidt said Google's made progress in that area.

"We are seeing market-share growth and good revenue growth as we have learned to operate in that environment," Schmidt said. "We have significant new products with respect to Chinese knowledge, Chinese language, Chinese search."

• Most of Google's business comes from text ads, but graphical "display" ads are a priority, particularly with the acquisition of DoubleClick. Where will Google employ such ads?

Display ads in video form are already used on YouTube and Google is evaluating other possibilities. "There are some other Google properties that might be good fits, though we haven't made clear decisions," said co-founder Sergey Brin. Those include "visual sites like Orkut. And there's some potential like Google Images."

• Mobile advertising looks good in areas such as Japan where there are devices with high-resolution screens and responsive networks, Brin said.

"The mobile ads work very well. There's nothing to dissuade me it would be any worse than traditional desktop search," he said.

•  Social networking is a challenge when it comes to advertising. Google ads appear on its own Orkut site and on News Corp.'s MySpace, and there's "a tremendous amount of inventory" to be sold, Brin said.

"It takes some time for some advertisers to realize they're there and target them effectively," Brin said.

Google is working on it. "Social-networking monetization (has) been an area where we applied a lot of new technologies," Brin said. Demographic targeting, which lets advertisers get some idea about what types of people use a site, "has been very successful," he said.