Google results beat Wall St expectations

17 Oct 2008

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Search and advertising giant Google has shown how resilient it is to economic turmoil by reporting a strong set of third-quarter results, beating the expectations of the financial community.

Although the company’s stock price has taken a hammering in recent weeks – at one point plummeting 45pc – business, it seems, continues to boom for the 10-year-old company.

“We had a good third-quarter with strong traffic and revenue growth across all of our major geographies thanks to the underlying strength of our core search and ads business. The measurability and ROI of search-based advertising remain key assets for Google,” said Eric Schmidt, CEO of Google.

“While we are realistic about the poor state of the global economy, we will continue to manage Google for the long term, driving improvements to search and ads, while also investing in future growth areas such as enterprise, mobile and display.”

Google reported revenues of US$5.54bn for the quarter ended 30 September, a 31pc increase over third-quarter 2007 revenues of US$4.23bn, and a 3pc increase over second-quarter 2008 revenues of US$5.37bn.

Google-owned sites generated revenues of US$3.67bn, or 67pc of total revenues, in the third quarter of 2008 – a 34pc increase over third-quarter 2007 revenues of US$2.73bn, and a 4pc increase over second-quarter 2008 revenues of US$3.53bn.



Google’s partner sites generated revenues through AdSense programs, of US$1.68bn, or 30pc of total revenues, in the third quarter of 2008 – a 15pc increase over network revenues of US$1.45bn generated in the third quarter of 2007, and a 1pc increase over second-quarter 2008 revenues of US$1.66bn.

Revenues from outside the US totalled US$2.85bn, representing some 51pc of total revenues in the third quarter of 2008, compared to 48pc in the third quarter of 2007 and 52pc in the second quarter of 2008. Revenues from the UK totalled US$776m. Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its AdSense partners, increased approximately 18pc over the third quarter last year.

Traffic Acquisition Costs (TAC), the portion of revenues shared with Google’s partners, increased to US$1.50bn in the third quarter of 2008. This compares to TAC of US$1.47bn in the second quarter of 2008. TAC as a percentage of advertising revenues was 28pc in the third quarter.



The majority of TAC expense is related to amounts ultimately paid to AdSense partners, which totalled US$1.33bn in the third quarter of 2008.

TAC is also related to amounts ultimately paid to certain distribution partners and others who direct traffic to the Google website, which totalled US$167m in the third quarter of 2008.


In the third quarter of 2008, the total charge of stock-based compensation was US$280m, as compared to US$273m in the second quarter of 2008.



“We currently estimate stock-based compensation charges for grants to employees prior to 1 October, 2008 to be approximately US$1.1bn for 2008,” the company said.

Last night, Google shares closed at US$352.03, despite reaching a 45-week low of US$309.44, a 45.2pc decline during the period.

By John Kennedy

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com