Google Reports Strong Quarter

  |  July 20, 2006   |  Comments

CEO Eric Schmidt attributes success to new products, new partnerships, and international expansion.

Google reported a 77 percent year-to-year increase in revenue, reaching $2.46 billion for the quarter, compared to $1.38 billion a year ago. Net income rose to $721.1 million, more than double the $342.8 million reported in the second quarter of 2005.

Revenue from Google's own sites totaled $1.43 billion, or 58 percent of total revenues. That's an increase of 94 percent over the year before, and a 10 percent increase over the first quarter. AdSense sites generated 41 percent of Google's revenue, increasing by 58 percent from a year ago to $997 million.

The company attributes much of its success to its continuing delivery of new products, new partnerships, and international expansion, according to Eric Schmidt, Google's chairman and CEO.

"When I look at why this is happening, I see the evolution of our strategy in front of us," Schmidt told investors on Google's quarterly conference call. "We don't see any signs of approaching any limits to this vision."

For advertisers, Google launched new products during the quarter like Google Checkout, click-to-play video ads, and mobile ads in the Japanese market. The company also implemented changes to its landing page quality score to improve the quality of its ads, made changes to its account management interface and added ad scheduling capabilities. Google also reduced the number of ads it serves on non-commercial searches during the quarter.

Continuing integration of the dMarc acquisition is expected to be completed in about three months, when Google will launch AdSense for Radio worldwide, Schmidt said.

All of these moves were intended to improve the quality of its ads for users and advertisers, according to Sergey Brin, Google's co-founder and president of technology.

"By increasing ad quality, our users will continue to rely on our ads as relevant. That's a win for everyone: users, advertisers, and Google," Brin said.

Google also continued to strike partnerships to distribute its products. It made deals with Dell and Adobe to distribute its toolbar, and with several financial institutions and e-commerce providers to co-market Google Checkout. These deals all add to and protect Google's search market share, Schmidt said.

Google also expanded internationally, with several localized versions of its home page, toolbar, Google Pack, and Google Talk. It is also working to improve the relevance of international search, and expanding its international operations.

The amount of revenue from outside the U.S. rose slightly to 42 percent of total revenues, up from 39 percent of total revenue a year ago.

"Google is committed to providing the best user search experience worldwide. We're going to get better and better, and we're always going to stay true to that," Schmidt said.

Despite meeting analysts' expectations with its numbers this week, Yahoo stock plummeted by nearly 20 percent after it announced during its earnings call Tuesday that it would delay its new advertiser interface until the fourth quarter, instead of the expected release planned for the third quarter.

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ABOUT THE AUTHOR

Kevin Newcomb

Kevin Newcomb joined ClickZ in August 2004, covering search marketing and other online marketing topics. He has been reporting on web-based businesses since 2000.

Before the bubble burst, Kevin was a marketing manager for an online computer reseller, handling copywriting, e-mail marketing, search marketing and running the affiliate program.

With a combination of real-world marketing experience and years of business journalism, Kevin brings to ClickZ a unique ability to deliver news and training materials that help online marketers do their jobs better.

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