Search engine marketing remains Google's primary revenue source, but executives dropped a bomb Thursday on the corporate structure of the company before diving into fourth-quarter 2010 earnings. Co-founder Larry Page will replace Eric Schmidt as chief executive officer in a reshuffle of senior management.
The moves, effective April 4, were made to "streamline decision-making and create clearer lines of responsibility and accountability at the top of the company," which makes some think that projects or platforms weren't getting pushed out as quickly as they had hoped.
Being first to market will become even more important in the future as the mobile, operating system and tablet markets heat up with Apple and others. During the Q&A section of the earnings call, Jonathan Rosenberg, senior vice president of product management at Google, explains how all employees -- especially engineers -- will be pushed to do more, faster.
In the new structure, Schmidt relinquishes day-to-day operations to become executive chairman. His focus turns to an advisory core for Page and co-founder Sergey Brin, along with deals, partnerships, customers and broad business relationships.
The company reported Thursday during Q4 2010 earnings that paid clicks -- the amount of times consumers click on ads -- grew 18%, compared with a year earlier, and 11% sequentially. On average, advertisers paid Google 5% and 4% more per click, respectively.
Google's revenue in the quarter jumped 26% to $8.44 billion in the fourth quarter of 2010, compared with the year-ago quarter. Revenue from company-owned sites rose 28% to $5.67 billion in revenue, compared with the year-ago quarter.
Partner sites generated revenue, through AdSense programs, of $2.50 billion, or 30% of total revenue. That's a 22% increase from fourth-quarter 2009 network revenue of $2.04 billion. Traffic-acquisition costs, the commission paid to marketing partners, came in at 25% of revenue.
International revenue from outside the United States totaled $4.38 billion, representing 52% of total revenue in the fourth quarter of 2010, compared with 52% in the third quarter of 2010 and 53% in the fourth quarter of 2009. The U.K.'s $878 million represents 10% of revenue.
A growing digital economy, continuous product innovation that benefits both users and advertisers, and momentum of newer businesses such as display and mobile continue to drive revenue and profits, according to Schmidt during the earnings call.
Profits jumped to $2.54 billion, or $7.81 a share -- up from $1.97 billion, or $6.13 a share, a year earlier. Google also expanded its employee head count 4.6% to 24,400. During the earnings call, Google execs told analysts and investors that employees across the board received a salary increase.
Quality improvements provided the biggest boost to revenue, according to the company. More than 20 updates led to gains nearly double what the company would typically see in a strong quarter. Several new businesses started to see momentum. One business -- display -- now has more than 2 million publisher partners. The number of transactions on the DoubleClick ad exchange tripled, and publishers that sell their ad space through the exchange nearly triple revenue when the exchange wins the auction.
In 2010, YouTube's revenue more than doubled. Google began adding features like live streaming to monetize content. Enterprise added customers such as the U.S. government's General Services Administration, and expanded a partnership with Japan's Softbank.
Android activation hit more than 300,000 phones daily in 2010, driving a 10-times year-over-year rise in the volume of searches from these devices.
In 2011, expect Google to "double-down again on the core of search and search ads, feed the 2010 winners display, YouTube, enterprise and Android, and do it all with even more financial rigor and cross-functional coordination all over the world," Rosenberg says. Local and commerce will become areas of focus for Google this year, he added.