Google Posts Q4 Profit, Plans to Expand Advertising Options

Though continually branching-out, Google remains primarily a search company, posting Q4 profit exceeding analyst expectations, stemming mainly from search ad revenue.

Google reported revenues of $3.21 billion for the quarter ended December 31, 2006, an increase of 67 percent compared to the fourth quarter of 2005, and an increase of 19 percent compared to the third quarter of 2006, according to the company.

Despite the firm’s well publicized acquisition of YouTube in October, and expansion into print , audio and mobile advertising, Google saw the greatest amount of revenue come through its own site’s search ad offerings, which generated revenues of $1.98 billion, or 62 percent of total revenues, in the fourth quarter of 2006.

“People ask us ‘What is the key to our success?’ and I think it’s search. Search is getting better and better as we expand around the globe,” said Eric Schmidt, CEO of Google, in a briefing to investors. “The strength of our ability to target this personal information continues to improve based on user feedback and better technology. And our advertisers can spend in the most effective way to address the bottom line.”

Google’s growth in the search marketplace was confirmed by Web metrics firm Nielsen/NetRatings, which stated that Web traffic to the Google parent company grew 24 percent year-over-year, from a three month average monthly unique audience of 87.1 million in Q4 2005 to 108.3 million in Q4 2006.

Google’s executives stressed that the company will continue to expand advertiser options as it tests new media, such as mobile and traditional media, and continues to integrate the YouTube library of video feeds.

“Advertisers are now using our targeting platform to place brand advertising across our content network, and they are going to have more options when the YouTube inventory comes online,” said Sergey Brin, Google co-founder and president, technology. “The ability to offer premium online and offline inventory, and the control to optimize it, puts us in a position to provide a complete advertising platform for all advertisers.”

Some search engine marketers are more concerned with the concrete numbers available today through Google’s search engine, rather than the company’s experimentation with payment systems, testing of advertising with video ads and other revenue models.

“Their own destination remains the huge driver of the revenues. Everything else that came up, especially when it comes to mobile and Google Checkout, and those emerging models, are not yet a source of direct revenue,” said David Berkowitz, director of emerging media for 360i, a search marketing agency. “Google’s still a search engine. Their numbers speak to that a lot more than their executives do.”

Google also posted AdSense partner site revenues of $1.2 billion, or 37 percent of total revenues, in the fourth quarter of 2006, a 50 percent increase over network revenues of $799 million in the fourth quarter of 2005, and a 16 percent increase over third quarter 2006 revenues of $1.04 billion. International revenues contributed 44 percent of total revenues in the fourth quarter of 2006, compared to 44 percent in the third quarter of 2006 and 38 percent in the fourth quarter of 2005.

In addition, the company stated that aggregate paid clicks, which include clicks related to ads served on Google sites and the AdSense network, increased approximately 61 percent over the fourth quarter of 2005 and approximately 22 percent over the third quarter of 2006.

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