Google's Sales Double, Profits Surge
The search giant reported sales of $503 million -- excluding the $302.9 million it paid to partners that run its search listings -- more than double the $250.4 million from the year-ago period. Google earned net income of $125 million, excluding the one-time charge of $119 million it paid Yahoo to settle a patent dispute. Including the Yahoo charge, Google's net income was $52 million compared with $20.4 million a year earlier.
"We do know the amount of demand that exists for the kind of advertising we do is really quite large and in many ways unmet," Google CEO Eric Schmidt said in a conference call with investors.
Schmidt declined to provide financial guidance for the company. He also declined to give the company's volume of leads, price per click or any timetable for the release of new products.
However, Google executives, in their first conference call as officers of a public company, were uniformly upbeat in assessing its prospects and the future of search engine advertising.
"While some have expressed concern about our reliance on online advertising, we believe this market is large and at its infancy, " said Larry Page, one of the company's founders.
Google's sites generated $411.7 million in sales, while its partners contributed $384.3 million. Google's partners took 79 percent of the revenue generated by ads. Schmidt said AdSense content ads had become "a significant portion of that."
Schmidt said Google expected to see a seasonal slowdown in the summer months, but in fact had generated an increase in search traffic on its own sites. Following Yahoo's strong growth in the quarter, Google's seems to indicate the market's expansion is not slowing, as many had thought earlier this year.
"The evidence we have from marketers is that this is not a marketing expense but a cost of sales expense, " Schmidt said.
International operations continued to grow in importance, accounting for 35 percent of sales, up from 31 percent a year earlier.
Earlier this week, Google won a partnership deal with AOL Europe from rival Overture Services.
"We see great opportunities all around the globe," said Sergey Brin, a Google founder and its president of technology.
Page mentioned Google's new initiatives to organize different types of information beyond Web pages, such as its Google Print and Google Desktop products.
"Only a fraction of the world's information is indexed on our computers," he said.
An expanding workforce has accompanied Google's breakneck business growth. The company added 376 employees in the quarter, finishing with 2,668 "Googlers." CFO George Reyes said the company is evaluating a range of compensation enticements, from stock options to cash bonuses tied to performance, to retain employees, many of whom have become millionaires with Google's skyrocketing stock price.
"The real core issue has us focused on retention of the great organization we put in place, " he said.