Google tops earnings, revenue expectations

Google reported earnings and revenue on Thursday that exceeded Wall Street’s expectations for its first fiscal quarter, ended March 31.

Google reported revenue of $3.66 billion, up 63 percent compared to the first quarter of 2006. Deducting the commissions it pays to its advertising partners, Google’s revenue was $2.53 billion, topping the $2.49 billion consensus expectation from financial analysts polled by Thomson Financial.

Net income came in at $1 billion, or $3.18 per share, compared with $592.3 million, or $1.95 per share, in last year’s first quarter. On a pro forma basis, which excludes certain items, net income was $1.16 billion, or $3.68 per share, exceeding the analysts’ $3.30 earnings per share consensus expectation.

Google CEO Eric Schmidt declared himself “ecstatic” with the quarter’s performance. “I’m very impressed that the global growth strategy of Google continues to work very well,” he said during a conference call to discuss the results.

Schmidt drew attention to the company’s core business: the contextually relevant, pay-per-click ads it delivers in its search results and partner sites. While Google’s new products and ventures get a lot of attention, the core search ad business is often overlooked in discussions about the company, he said.

“We’re still at the beginning of that business. A lot of people have said that maybe this isn’t such a big business. It’s a huge business, and we have a lot of room to grow there,” Schmidt said. Google runs the world’s most popular search engine.

As they have done since Friday, when Google announced its intention to acquire online ad company DoubleClick, executives reiterated that the $3.1 billion acquisition will complement Google’s ad business by boosting its ability to sell display advertising, a weak spot so far.

Schmidt also clarified that, contrary to recent press reports, Google isn’t building a system to filter out and block pirated videos in its YouTube video sharing site. Instead, Google’s upcoming “Claim your Content” tool will help to “somewhat automate” the process through which content owners flag illegally copied videos so that Google can take them down from the site, he said.

“It’s not a filtering system. The technology doesn’t block uploads,” he said. “It makes it much more effective and quicker to get us to remove inappropriately uploaded content. It’s very much compliant with the DMCA.”

Schmidt’s comments would indicate that users will still be able to upload whatever they choose to YouTube while keeping the corrective action purely after the fact and putting the onus on Google and the content owners to identify and remove videos. Google faces a $1 billion copyright infringement lawsuit by Viacom over the inclusion of Viacom videos on YouTube without permission.

Google-owned sites generated revenue of $2.28 billion, or 62 percent of total revenues, while advertising partners generated $1.35 billion.

Revenue from outside of the U.S. represented 47 percent of total revenue, up from 42 percent in last year’s first quarter.

Paid clicks on Google sites and in ad network partner sites increased about 52 percent over the first quarter of 2006.

Headcount increased worldwide to 12,238 full-time employees as of March 31, up from 10,674 full time employees as of Dec. 31, 2006, Google said.

By contrast, Google’s rival Yahoo reported disappointing financial results on Tuesday, and its stock subsequently took a hit from which it hasn’t recovered as investor confidence dropped regarding Yahoo’s ability to energize its search ad business with its new Project Panama system.