Google reported a record $1.6 billion in revenue for the third quarter, virtually double what it brought in a year ago and up 14 percent sequentially. Net income was up seven-fold over the year-ago period to $381 million, or $1.31 per share.
The extraordinary earnings, almost all from advertising, are all the more stunning considering that the third quarter is seasonally slow online.
Revenue from sites owned by Google grew considerably faster than that from sites in its extended AdSense network. Company-owned sites brought in 56 percent of all earnings for the quarter, or $885 million. That’s a 20 percent lift over Q2. Network revenues, meanwhile, grew by 7 percent; these accounted for 43 percent of the whole, or $675 million.
Money coming in from outside the U.S. was 39 percent of all revenue, same as last quarter and up four percent from Q3 2004. Growth overseas is partly driven by the launch of a Google reseller program in China, which has brought in advertisers who CEO Eric Schmidt said “in some cases… don’t have PCs.”
Traffic acquisition costs, or that money paid to publishing partners for carrying its search results and paid listings, swelled to $530 million from $494 million in the second quarter. Still, TAC as a percentage of ad revenues went down, from 36.1 percent to 34 percent, because Google made more of its money from sites it owns.
Analysts and investors on the company’s earnings call lauded the earnings, but they extensively questioned Google executives about the uneven growth in revenue from its own sites versus those in its publisher network. One asked what Google was doing to compete with rival Yahoo Publisher Network, and what partners had been gained or lost.
“We work very hard for our AdSense publishers to have good monetization,” said Sergey Brin, co-founder and president of technology. “There have been a handful of losses of accounts, relatively small ones. I haven’t seen any particular pattern. iVillage had some specialized functionality they were interested in, and weren’t looking so hard at the core monetization.”
Brin said Google’s new site-targeting capabilities, launched in Q2, grew considerably during the quarter. He also gave a nod to the company’s nascent print advertising program, which he said hundreds of publishers had expressed an interest in.
True to form, Google came out with many new products, experiments and hires during the quarter. It launched blog search capabilities, a philanthropic Google foundation at Google.org, an RSS aggregator, a collaboration with NASA, and a bid to provide free Wi-Fi Internet to the city of San Francisco. It also hired Vint Cerf, one of the founders of the Internet, and named Princeton University President Shirley Tilghman to its board. Additionally, the company marked its seventh birthday.
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