• by Shankar Gupta , April 21, 2006

Following a fourth-quarter report that left some investors lukewarm, Google Thursday reported significant first-quarter growth. The company took in $2.25 billion in revenues, marking a 17 percent increase from the fourth quarter, and a 79 percent increase over the first quarter of 2005.

The search giant's profits totaled $592 million, up from $372 million in the fourth quarter. The profits, which came out to $2.29 per share, after excluding one-time costs such as stock-based compensation and a class-action lawsuit settlement, beat analysts' expectations of $1.98 per share. The growth quarter led shares of Google to jump 4.9 percent to $435.51 in after-hours trading.

The bullish response follows more a pessimistic reaction three months ago, when Google for the first time issued an earnings report that failed to meet analysts' expectations. Search expert Gary Stein said this quarter's strong earnings shows that the company continues to grow quickly. "Google doesn't show signs of leveling off, and it really says something to see this quarter so strong after last quarter, when the blush fell off the rose a bit in investor's minds," he said.

During a call with investors and the press, Jonathan Rosenberg, Google's senior vice president of product management, said that the search giant would consider including branded advertisements on Google pages, similar to the "Da Vinci Code" promotion now running on the Google personalized home page, but reiterated that the company would not run branded advertising on the main search page. "There are lots of opportunities outside search where some of the branded efforts might make more sense," he said.

Stein added that the company's move to include branded advertising on the Google-owned pages, rather than simply through the Adsense network, makes it difficult to peg Google as only a search engine. "They're clearly comfortable finding new inventory," he said. "You can't say Google doesn't have premium inventory like AOL or Yahoo would get on their home page. It gets harder and harder every day to put Google in a particular box, whether they're an application, or a portal, or a search engine."

Also during the call, Google execs touted the rate of innovation in products, citing new versions of Google Toolbar and Google Desktop Search, as well as integrating results from Google Base into the main search page and innovations in Google Local. "Google is now the world's faster innovator in scale. The number of product and markets that we offer increases in scale, and we are just at the beginning of the Internet revolution," said Google CEO Eric Schmidt. "This quest is not a short-term one, and we expect strong continued growth and innovation in this space for a long time to come."