It was another bang-up quarter for Google (NASDAQ: GOOG), as the search giant reported first-quarter revenues of $5.19 billion and net income of more than $1.31 billion.

As reported earlier today, Google's first-quarter revenue is 42 percent greater than a year earlier and 7 percent higher than the prior quarter.

Also, for the first time, international sales accounted for more than half (51 percent) of Google's overall revenue.

In a conference call with financial analysts, Google CEO Eric Schmidt said the 51 percent figure was a turning point, marking Google's ascension as a "truly international company."

Google's success, even in the face of a struggling U.S. economy, is good news for the company and perhaps the online advertising sector as a whole. "During the last recession in 2001, advertisers pulled back more from the Internet than more traditional advertising outlets, IDC analyst Karsten Weide told InternetNews.com.

"But we're not seeing or hearing that now in our talks with media companies and advertisers," Weide said. "Google's results are a confirmation of that, which is very encouraging."

Schmidt said he thought Google would continue to grow even if the economy continues to struggle because of "the transformative effect" its search-advertising technology is having in helping companies reach consumers in ways they never could have before.

Schmidt said he and other company execs had analyzed what effect a further downturn in the economy might have and concluded the company will still do fine because its services are well targeted.

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Analyst Weide said there's no question Google is playing from a position of strength, but he sees potential vulnerabilities. For example, he notes the company's attempts to diversify revenue sources aren't making much headway.

"Google is twice the size of Yahoo and growing three times faster, but I think they're strategically vulnerable," Weide said. "Search, as a share of revenue, is going up again, so anything that disrupts the search engine market will hurt Google. It took Google five years to trounce Yahoo, and who's to say there isn't a startup working on something that could be just as disruptive."

On the analyst call, Google co-founder Larry Page said he was "excited" by YouTube's growth. "There are up to 10 hours of video uploaded on YouTube every minute," he said.

He also noted the introduction of video ads within the user-generated videos on YouTube and the potential boost from the DoubleClick advertising network that Google acquired.

But Weide said Google has a long way to go to catch Yahoo, which is stronger in display ads than the small text ads that drive the bulk of Google's growth.

"In terms of advertising sales, DoubleClick is nowhere," he said. "They have some revenue from their Ad Exchange service, but the rest is technology and services."

And while some estimates are YouTube may generate more than $100 million in advertising this year, Weide said that's small potatoes considering the $1.65 billion Google paid to buy the company.

Weide said YouTube is not attractive to big-name advertisers who are extremely sensitive to having their ads associated with anything that might be illicit or inappropriate content.

Omid Kordestani, a Google vice president for sales and business development, said the company plans to work more closely with content owners on YouTube to find the right matchups and better targeting of ads.

"It's very early to make a judgment on which ads are working well," Kordestani said.

Eventually, he said Google wants to provide a kind of "CMO dashboard" for chief marketing officers that would let them more easily measure the effectiveness and allocate online ad placements."

Google has other social network investments, including an ad deal with MySpace. Page said part of the challenge in that space is "getting an advertiser ecosystem targeted in a way that makes sense."

"I'm optimistic there's a business to be made, but it takes time for advertisers to be there," he said.

The search for better search

Meanwhile, Google continues to invest heavily in its core business of search and related advertising as well as applications.

Co-founder Sergey Brin said Google's made considerable progress the past year improving results for the most difficult or sophisticated searches, while doubling the number of queries in newer areas, including images, video and books. He also said Google's expanded its mobile search capabilities to 40 languages and now offers the full YouTube library for mobile.

"Our mobile search traffic is growing rapidly," Brin said.

There wasn't any specific discussion of Microsoft's unsolicited bid to acquire Yahoo during today's call, but Schmidt did comment briefly on recent reports that Yahoo is testing a system that uses Google's service to deliver ads alongside its Web search results.

"It's nice to work with Yahoo; we like them very much," Schmidt said.

Analyst Weide said he thinks Yahoo is working with Google to "annoy" Microsoft and keep the software giant at bay. But he also said if any combination of Google and Yahoo in search advertising is finalized, it would face extreme scrutiny on antitrust grounds.