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Fri, Feb 02, 2007 - Page 10 News List

Google reports big rise in fourth quarter profits

BLOCKBUSTER GROWTH Google said it is expanding its product offerings, developing partnerships, integrating YouTube and experimenting with new advertisements


Google chief executive officer Eric Schmidt gestures at the MacWorld Conference & Expo in San Francisco on Jan. 9.


Continuing the blockbuster growth of its search-driven advertising business, Google Inc reported a sharp rise on Wednesday in both sales and profit in the fourth quarter.

Google, the largest Internet search engine, also continued to outpace rivals like Yahoo Inc and Microsoft Corp, which last week reported far slower growth in their online offerings.

"Business continues to be very, very good here at Google," Eric Schmidt, Google's chief executive, said in a conference call with investors and reporters.

In an interview, Schmidt said Google's business, which earns most of its revenue when users click on ads that appear next to search results, was strong in terms of traffic and advertising growth both domestically and internationally.

Google is also showing fewer ads on each search, but those ads are more relevant to users, are clicked on more frequently, and hence, generate a better return for both Google and for advertisers, he said.

Derek Brown, an analyst with Cantor Fitzgerald, said: "Their performance is extraordinary even in absolute terms, but particularly in comparison with the companies they are competing with."

Google said net income for the quarter nearly tripled to US$1.03 billion, or US$3.29 a share, up from US$372.2 million, or US$1.22 a share, in the final quarter of 2005. Excluding charges related to stock-based compensation and other adjustments, the company earned US$997 million, or US$3.18 a share.

Quarterly revenue rose 67 percent from a year ago, to US$3.21 billion. Google sells ads that are displayed on other sites, and passes most of the revenue from those ads to the sites owners. Excluding those payments, Google's revenue was US$2.23 billion.

Some analysts said Google's growth could even accelerate further this year.

"I still see a lot of good things coming down the pike," Safa Rashtchy, an analyst with Piper Jaffray & Co.

Google's results come at a time when the company is rapidly expanding its product offerings, developing partnerships with the likes of AOL and MySpace, integrating its acquisition of the video search service YouTube and experimenting with new forms of advertising, including video, audio, print and on mobile phones. Both the company and analysts see many of these initiatives paying off financially over the next couple of years.

Schmidt said that while text ads linked to search results continued to perform extremely well, Google's diversification was essential to its future growth. And he dismissed criticism that the company has introduced too many products, including many that have not been hits with users, and risks losing its focus.

"We have concluded that we are expanding our mission, if anything, not fast enough," he said.

Schmidt also said that search on mobile phones and other portable devices would grow substantially this year, but that the financial impact would not be noticed until next year.

YouTube would continue to operate with a large degree of autonomy. Google would use its technology and expertise in online advertising to cash in on the growing popularity of YouTube.

But the acquisition remains clouded by the threat of potential litigation by movie studios against Google over the proliferation of copyrighted videos on YouTube.

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