Google reports surging revenue and profit

21-04-2006

by Ciara O'Brien

Google recorded a remarkable surge in revenue for its first quarter of the year, rising by almost 80 percent, and boosting profit along with it.

Revenues at Google surged to USD2.25 billion for the quarter, a 79 percent increase on the same period in 2005, and a 17 percent increase over the final quarter in 2005.

Chief executive of the company, Eric Schmidt, said that Google was very happy with its first quarter results. "We basically have good news across the board," he said in a company webcast on Thursday night. "We made a lot of progress on what we consider our highest strategic priority, both search quality and traffic. It looks to us like we'll continue to gain market share."

Schmidt said the search giant's international performance was strong. Revenues from outside the US represented more than 40 percent of total revenues, a small rise from the previous quarter.

Google-owned sites generated more than half of the total revenues, with USD1.3 billion making up 58 percent. This is a 97 percent increase over first quarter 2005 revenues of only USD657 million.

Some 41 percent of revenues were generated through Google's partner sites, including the AdSense program. The USD928 million is a 59 percent increase over network revenues of USD584 million generated in the first quarter of 2005.

Wall Street analysts had been expecting net income of USD1.97 per share, with revenue of USD1.4 billion, excluding traffic acquisition costs (TAC) and stock-based compensation. Google shattered that prediction, with profits per share of USD2.29, excluding one-off items. In the first quarter of 2006, TAC totaled USD723 million -- 32 percent of advertising revenues.

"Google had an exceptional quarter with strong growth and profitability, from both Google properties and the network," said Schmidt.

"We are driving this growth through investments in our infrastructure and our people, product innovations that attract new users, and relationships with advertisers and partners around the world. The strength of our business model gives us the opportunity to invest in our business, allowing us to maintain and grow our market leadership."

Rival search engine Yahoo recently reported a rise in revenue but a fall in overall profit. Although first-quarter revenues surged 34 percent to USD1.6 billion, profits fell as the search engine started listing employee stock options as an expense. The company made a net profit of USD160 million, with per-share earnings of USD0.11.