Google Beats Estimates Despite Slower Q3 Growth

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Google surpassed analyst expectations in Q3, reporting a 31 percent boost in revenues over Q3 2007. The company attributed its positive quarterly earnings to strong traffic and revenue through its search ad business. Still, growth slowed significantly compared to the third quarter of 2007, when Google's revenue grew almost 60 percent over the same period the year before.

Google -- mired in the same economic downturn prompting budget tightening throughout the online ad industry -- earned $5.54 billion in revenues, 3 percent more than the previous quarter.

Google Chief Eric Schmidt suggested during the firm's earnings call this afternoon that, in his conversations with CEOs at other companies, the only real consensus about the economic crisis is that "we're all in uncharted territory." However, he said the company is preparing for the storm with long-term planning and a tight control on expenses.

Despite strong fundamentals -- including the 31 percent Q3 revenue increase and traffic growth in most verticals -- Google executives said the company had seen some impact of the global storm on its business. Among the negative effects is softness in the U.K. market and in several expectedly weak verticals, including mortgage financing, auto financing, and real estate.

Google reported net income came in at $1.35 billion, up from $1.25 billion the previous quarter. The firm garnered 67 percent ($3.67 billion) of its total revenues from its own Web sites, a 34 percent leap over Q3 2007. Revenues from its partner sites through its AdSense network totaled $1.68 billion, or 30 percent of all revenues. Google took in $2.85 billion, or 51 percent of its Q3 revenues from outside the U.S.

The firm also said paid clicks on its own site and AdSense affiliate sites rose 18 percent over those of Q3 2007.

Schmidt said the DoubleClick integration is proceeding well, adding DoubleClick President David Rosenblatt was just named president of Google's global display ad business. In another promotion, Tim Armstrong, previous head of North American sales, was named president of the Americas operations and SVP. Nikesh Arora was also promoted to SVP of Google.

On the company's plans for the display market, Co-founder and President Sergey Brin added, "We see this as an area that is ripe for development and innovation, and we think we can create great tools for...display."

At several moments during the call, executives made reference to the potential for generating revenue from local advertising. "Google Maps and Earth -- they're a really big monetization opportunity," said Brin.

Separately today, Google announced a self-serve tool for the creation of display ads and two partnerships to support its TV Ads service. A deal with Harris Corp. will allow cable networks using that company's system to forward available inventory to Google TV Ads for sale. And CoreMedia Systems, provider of analytics tools to direct response advertisers, will integrate data from Google's platform.

Kate Kaye contributed to this report.