Search Engine Proves Earnings Engine, Google Scores Big In First Quarterly
"We are very pleased with the results of this quarter. Record revenues, robust margins, and cash generation all illustrated strong performance and execution over the last quarter," stated Eric Schmidt, chief executive officer, Google, Inc.
Of the $806 million in revenue, the Google network of properties was responsible for $412 million, or 51 percent of revenues--an increase of 99 percent over the third quarter 2003. AdSense revenue--contextual revenue generated by Google's partner sites that display its listings--totaled $384.3 million, or 48 percent, a year-over-year increase of 120 percent for the same period last year.
GartnerG2 Analyst Denise Garcia said she was "not surprised" by Google's strong quarter. "It's great news for the online advertising industry," she said, adding that GartnerG2 and other research firms expect 12 percent to 25 percent growth for online advertising for the full year 2004.
Garcia added that Google's third-quarter numbers landed in-line with and above most analyst predictions. Total sales for the quarter were $504 million, which in fact beat most analyst predictions. Traffic acquisition costs, which Google pays out to its partners, were $303 million or 79 percent of the Google network revenue.
However, the search giant did post a year-over-year decline in operations income. This is due to the non-recurring, non-cash charge of $201 million Google gave rival Yahoo! Inc. in stock as part of the settlement terms of a patent dispute with Overture service, a Yahoo! subsidiary. As a result, operations income fell to $11.1 million for the quarter, compared to last year's $66.6 million.
Google's international business accounted for 35 percent of revenues. "Our business is increasingly global," said Google co-founder and Chief Technology Officer Larry Page, who added that the company will look to expand its global presence in the future. Just this week, Google announced that it will provide sponsored listings for AOL Europe, a business it won from rival Overture services.
Since its Aug. 19 initial public offering, shares of Google, Inc. have risen more than 70 percent from the offering price of $85. In after hours trading Thursday, Google shares rose to $155, its highest-ever price.