Google profit soars 92 per cent

By Eric Auchard

SAN FRANCISCO - Google today posted a 92 per cent jump in quarterly profit and revenue near the top end of forecasts as the company tightened its grip on the Web search market, sending its shares up 7 per cent.

Company-owned websites such as and Google News powered traffic growth, while foreign markets rose to 44 per cent of revenue from 39 per cent a year earlier as the company grew in countries such as Britain and Germany.

"Google right now seems to be running on all cylinders. They're executing phenomenally well," said Jay Wong, a portfolio manager at Payden & Rygel Investment Management.

Net income for the third quarter rose to US$733.4 million, or US$2.36 per diluted share, from the year-earlier quarter's US$381.2 million, or US$1.32 per share. Analysts had been looking for a net profit, on average, of US$2.13 per share, according to Reuters Estimates.

Gross revenue rose 70 per cent to US$2.69 billion, topping the average Wall Street forecast of US$2.62 billion, according to Reuters Estimates. Forecasts had ranged between US$2.48 billion and US$2.76 billion.

Excluding traffic acquisition costs of US$825 million, the financial cut that affiliated websites receive for featuring Google advertising, revenue rose to US$1.87 billion.

"It was a clean beat quarter," said Tim Boyd, an analyst with Caris & Co. "The stock should be going up from here."

Shares of Google rose to US$457.34, a gain of 7.3 per cent, in composite Nasdaq trade on Thursday.

After a lacklustre 2006 first half, the stock is up 10 per cent in the year to date. It hit an all-time high on January 11 of US$475.11. The consensus target on Google shares is US$499.20 among 25 financial analysts surveyed by Reuters Estimates.

Google-owned websites generated revenue of US$1.63 billion, or an 84 per cent increase from US$885 million in the third quarter of 2005. Google earned 60 per cent of its total revenue from its own sites, versus 56 per cent a year earlier.

Revenue from affiliated websites using Google's AdSense programs accounted for 39 per cent of revenue, or US$1.04 billion, a 54 per cent rise over year-earlier revenue of US$675 million.

Google's growth rate is two to three times faster than its internet peers: eBay Inc. (EBAY.O: Quote, Profile, Research) at 31 per cent and Yahoo Inc. (YHOO.O: Quote, Profile, Research) at 19 per cent and major software rival Microsoft Corp. (MSFT.O: Quote, Profile, Research), which has revenues growing at about 10 per cent.

"They are stealing share, which was expected for Google versus Yahoo, in paid search," Global Crown Capital analyst Martin Pyykkonen said. "Google's on full throttle."

Google led the US Web search market with 44.1 per cent in August, according to audience measurement firm comScore. Google's global Web search market share is upward of 60 per cent, but it has struggled in key Asian markets.

As of August, Google had gained 6.8 percentage points in US Web search market share in the past year. Its closest rival, Yahoo, lost 1.0 percentage point, a September comScore report showed. Yahoo plans to introduce a long-awaited competitive response to Google's Web advertising system early next year.

Third-quarter net profit included US$100 million in stock-based compensation charges versus US$46 million in option expense charges in the year-earlier quarter.


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