Tags: google | earnings | internet | advertising

Google Profit Tops Estimates on Search-Ad Growth

Thursday, 13 Oct 2011 07:28 PM

Google Inc., owner of the world’s most popular search engine, reported sales and profit that beat estimates as businesses spent more on advertising to online consumers. The shares rose in extended trading.

Third-quarter sales, excluding revenue passed on to partner sites, rose to $7.51 billion, Mountain View, California-based Google said on its website. That topped the $7.23 billion average of analysts’ estimates compiled by Bloomberg. Profit, excluding some items, was $9.72 a share, beating the $8.76 average estimate.

Google, even amid concerns about the economy, is benefitting from growing demand for online advertising, including the search-based marketing along with display and mobile device advertising. Search advertising should reach $37.7 billion this year globally, up 23 percent, while total Internet ad spending should climb 20 percent percent, according to media researcher MagnaGlobal.

“The search business is relatively resistant to the slowing economy,” said Clay Moran, an analyst at Benchmark Co. “The search business will do relatively well and has done relatively well. The other reason is they are gaining share in display and mobile.”

Google’s shares climbed as much as 7 percent to $597.99 as of 4:41 p.m. New York time in extended trading. Earlier, they rose 1.9 percent to close at $558.99 on the Nasdaq Stock Market. The shares have dropped 5.9 percent this year.

Third-quarter net income climbed 26 percent to $2.73 billion, or $8.33 a share, from $2.17 billion, or $6.72, a year earlier.

Ad Clicks

The number of clicks on ads rose about 28 percent in the third quarter from the year-ago period while the average cost per click increased approximately 5 percent, the company said.

The company’s new social-networking effort, Google+, now has more than 40 million users, up from more than 10 million in July.

Even with more competition from Microsoft Corp., Google picked up market share in the U.S., according to Sunnyvale, California-based Efficient Frontier Inc., which helps companies promote products online. Google had 82 percent of spending on search advertising in the third quarter, up from 81 percent in the two previous quarters.

Microsoft, Yahoo

Microsoft, which provides search and ad services for Yahoo! Inc.’s U.S. websites under a new agreement, had 18 percent, down from 19 percent in the previous two quarters, according to Efficient Frontier.

Google also has made gains in the share of searches made by online surfers. The company increased its U.S. market share to 65.3 percent in September, up from 64.8 percent in August, according to ComScore Inc. Yahoo remained No. 2, even as its market share fell to 15.5 percent from 16.3 percent. Microsoft was unchanged at 14.7 percent.

“Search is good,” said Kerry Rice, an analyst at Needham & Co. in San Francisco who rates the stock a buy and doesn’t own shares. “Paid search is still the biggest component of online advertising, and Google’s obviously going to win the vast majority of that dollar.”

While traditional searches may be growing, Google is pushing into new areas, including mobile. Google’s Android software has emerged as the biggest smartphone operating system, bolstered by HTC Corp., Samsung Electronics Co. and Motorola Mobility Holdings Inc. adopting the software.

Mobile Run Rate

The run rate for mobile revenue is now more than $2.5 billion on an annualized basis, Chief Executive Officer Larry Page said today on a conference call with investors.

With the growth, Google and device makers have faced legal challenges around the world from Oracle Corp. and others. To bolster its patent lineup, Google said in August it planned to purchase Motorola Mobility for $12.5 billion, its largest acquisition ever. The move bolsters its intellectual property, with Motorola Mobility bringing more than 17,000 patents.

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Google Inc., owner of the world s most popular search engine, reported sales and profit that beat estimates as businesses spent more on advertising to online consumers. The shares rose in extended trading. Third-quarter sales, excluding revenue passed on to partner sites,...
google,earnings,internet,advertising
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2011-28-13
 

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