Google ‘Ecstatic’ Over Earnings

Google  will run out of superlatives before it runs
out of steam, it seems. The search giant reported that revenues jumped 63 percent during the quarter ended March 31, 2007, an increase of 63 percent
over the first quarter of 2006 and 14 better than the fourth quarter of
2006. Earnings per share were $3.18 during Q1 of 2007, compared with $1.95
for the year-ago period.

Google CEO Eric Schmidt said “we are ecstatic about our results,” during a
conference call to discuss the earnings.

Ecstatic? Schmidt and co-founders Larry Page and Sergey Brin should be, given that the company’s core business continues to surge, providing
cash for it to dabble and invest in other areas. Schmidt said that “our core business is very strong and it is the core business that is driving our
success.”

He added that the success of the company’s core ad-selling business “allows
us to take calculated risks in new markets and expand in new products.”

Google-owned sites generated revenues of $2.28 billion, or 62 percent of
total revenues, in the first quarter of 2007, up 76 percent over first
quarter 2006 revenues of $1.30 billion and a 15 percent increase over fourth
quarter 2006 revenues of $1.98 billion.

Google’s partner sites generated revenues, through AdSense programs, of
$1.35 billion, or 37 percent of total revenues, in the first quarter of
2007. This represents a 45 percent increase over network revenues of $928
million generated in the first quarter of 2006 and a 12 percent increase
over fourth quarter 2006 revenues of $1.20 billion.

Schmidt noted that traffic acquisition costs (TAC), the portion of revenues
shared with Google’s partners, increased to $1.13 billion in the first
quarter of 2007, compared to TAC of $976 million in the fourth quarter of
2006. Schmidt noted that this cost will continue to rise for the foreseeable
future as Google rewards its partners more handsomely for increased traffic.

But Schmidt indicated that customer satisfaction is the most important
metric he follows. “The primary management focus is around end-user
happiness,” he said.

The experimentation to which Schmidt made reference includes a suite of office
productivity tools, a Web hosting
service for small businesses and the acquisition of video sharing site
YouTube. Schmidt defended those moves as creating more reasons for consumers
to visit Google properties, thus feeding the belly of the ad-serving
colossus.

The most recent
market figures show Google with 64 percent of the U.S. search market, with
its closest rival, Yahoo , trailing badly at 21 percent
and losing ground. Last year, Yahoo’s share of the market was 22 percent for
the same period.

Google acquired
YouTube for a whopping $1.65 billion in October of last year, in a deal
which left many observers shaking their heads.

Google still faces a $1 billion
lawsuit filed by Viacom over the use of its copyrighted material by
YouTube.

Google announced its intention to acquire ad-serving pioneer DoubleClick on April 13.

Overall, it’s been a good April for Google, which also took care of some
unfinished business earlier this month, coming to
terms with AFP so that it can aggregate content from the French news
agency onto its news site.