Google Profits Quadruple

by Shankar Gupta, Jul 22, 2005, 6:00 AM

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Google's revenue, virtually all of which comes from online ad dollars, nearly doubled in the second quarter of 2005, totaling a record $1.384 billion--representing a 98 percent year-over-year increase from last year's second quarter, the search giant reported Thursday. Quarterly profits came to $342.8 million, or $1.19 a share--a fourfold increase from last year's 30 cents per share.

AdWords advertising on Google's own sites, including the main search page, local search, and maps, grew faster than off-site advertising on the Google AdSense network, although the two revenue streams are still divided fairly equally. Revenue from the Google-owned sites totaled $737 million, representing 53 percent of total revenues, and a 115 percent year-over-year increase. Google's network generated $630 million--46 percent of total revenues--representing an 82 percent year-over-year increase in the network's revenues in the second quarter.

eMarketer Senior Analyst David Hallerman said that Google's results are a testament to its strong brand. "To stay at such a high level, it's kind of like Lance Armstrong winning the 'Tour' so many times," he said. "It's one of the major brands in the world, and they've never done any advertising. They're the first place for enough users--and they keep them satisfied, and those people click, and that's where the revenue comes from."

Last quarter, Google released a legion of new products, including Google Maps with a satellite mapping function; Google Earth; a personalized Google home page; Google Print; and Google Video.

In a conference call with reporters and analysts, co-founder Larry Page said the company will continue creating new products and hiring engineers to do this. Although fairly tight-lipped about future developments, Page said that Google will be rolling out a number of new mobile services in the coming months, including a mobile version of Google Maps.

Google's other co-founder, Sergey Brin, highlighted the new developments in international markets, mentioning new offices in Latin America and China. Brin specifically mentioned former Microsoft corporate vice president Kai Fu Lee, who the company tapped to be president of its China operations. Lee is the center of a legal battle between his former employer, Microsoft, and Google. Microsoft this week filed a suit alleging that Lee is violating a non-compete clause in his Microsoft contract by going to work for rival Google.

Hallerman added that although the majority of Google's revenue comes from the U.S. market, its overseas markets are growing far more rapidly. According to eMarketer's numbers, Google's overall 98 percent growth in revenue breaks down into a 74 percent increase in U.S. ad revenue and a 147 percent increase in international ad dollars. "While you can't deny that the U.S. is still the dominant portion of their revenue, the growth shows they're going to be investing in other markets outside of the U.S. to gain more money," he said.

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