• by Laurie Sullivan  @lauriesullivan, October 14, 2010

Google reported Thursday that profit rose 32% during the last quarter as a result of advertisers spending more on paid search and display advertising. Search ads remain the company's primary revenue driver, from desktop to mobile. Display ads also continue to pick up. The company posted a profit of $2.17 billion -- or $6.72 a share -- up from $1.64 billion, or $5.13 a share, in the year earlier.

Jonathan Rosenberg, Google's senior vice president of product management, told investors during the earnings announcement that display advertising is on an annual run rate of $2.5 billion, which means the company should earn that amount from non text-based ads. YouTube is monetizing more than 2 billion views per week. Videos on the site get about 2 billion views daily. And mobile is on an annualized run rate of more than $1 billion. The numbers were intended to reassure analysts that emerging markets will augment search revenue in the long term.

There are about 90,000 applications on Android, Google CEO Eric Schmidt added. When it comes to mobile, Google plans to make a profit from value-added services and leave the Android app development to independent developers. About 200,000 handsets running Android get activated daily.

Businesses spent more on paid-search advertising during the third quarter. Aggregate paid clicks, which include clicks related to ads served on Google sites and those of AdSense partners, increased approximately 16% compared with the third quarter of 2009 and increased approximately 4% over the second quarter of 2010.

The average cost-per-click, which includes clicks related to ads served on Google sites and the sites of AdSense partners, increased 3% during the third quarter of 2009 and increased 2%, sequentially. Traffic Acquisition Costs, the portion of revenue shared with Google's partners, increased to $1.81 billion in the third quarter of 2010, compared with TAC of $1.56 billion in the third quarter of 2009. TAC, as a percentage of advertising revenue, came in at 26%, compared with 27% in the year-ago quarter.

Didit CEO and Co-Founder Kevin Lee says Google's earnings were in line with expectations. "We have seen ad enhancements like PPC Sitelinks and product plus boxes drive significant click volume increases and expect that to continue through the next quarter," he says.

Google benefited from an increase in paid-search ads in September. Net income rose 32% to $2.17 billion, or $6.72 a share, from $1.64 billion, or $5.13, a year earlier. The Mountain View, Calif. company gained U.S. search market share to 66.1% from 65.4% sequentially, after launching Google Instant, which gives users search results as they type in the query, according to comScore. Google had experienced three months of losses. Google Instant will become available this fall on mobile.