• by Shankar Gupta , February 2, 2005

Google released its fourth-quarter earnings report Tuesday, posting profits of 71 cents per share, which fell short of analyst's predictions of 77 cents per share. Analysts, however, were optimistic about Google's standing, citing its meteoric growth from the fourth quarter of last year, and large payouts of stock-based compensations that analysts discount when figuring per-share profits.

Discounting the $291 million paid in stock compensations, Google posted profits of 92 cents per share, topping the 77 cents per share that analysts predicted. In the last quarter of 2003, Google's profits were 10 cents per share; Google put its yearly sales at slightly over $1 billion, up from $512 million last year.

"The fact that they're continuing to do so well emphasized their dominance in the paid search space," said eMarketer Analyst David Hallerman. "That the name has become a verb describes how strong Google has become. That gives them the traffic."

In the coming year, however, Google may face stiff competition against MSN--which just launched its own proprietary search engine--and Yahoo!.

But Hallerman said that, because of Google's name recognition among Internet users, MSN and Yahoo! are Davids to the search giant's Goliath.

"Who's the person who monetizes it? It's the user. MSN's going to have to do a lot of marketing and a lot of convincing to get users to use it and to click," he said. "MSN has already started to put a lot of marketing dollars behind this, but they still have a fair amount of catching up to do."

According to NextSearchSurvey, a survey on Web surfer's search engine use, a whopping 87 percent of those surveyed would pick Google if they had to pick a "primary search engine." Yahoo! came in second place, with 8 percent, and MSN weighed in at 1 percent.