Google Posts Solid Q2 on Advertising Firepower

By Clint Boulton  |  Posted 2010-07-15

Google July 15 announced net revenues of $5.1 billion for the second quarter on earnings per share of $6.45, providing the latest in a string of strong quarters.

Analysts polled by Thomson Reuters had expected $4.99 in revenue on EPS of $6.53. Google's Q2 numbers are still much better than the same period a year ago, when the company earned $5.36 a share on net sales of $4.07 billion.

The search engine reported GAAP net income of $1.84 billion, compared with $1.48 billion in Q2 2009.

Counting TAC, or the money it pays to partners to advertise on their Websites, Google reported revenues of $6.82 billion, a 24 percent increase over second-quarter 2009 revenues of $5.52 billion.

TAC grew from $1.45 billion in the Q2 2009 to $1.73 billion this year, good for 26 percent of Google's ad revenues.

As financial analysts expected, paid clicks, or clicks related to ads served on Google sites and the sites of its AdSense partners, grew 15 percent from the year-ago period.

Google shares fell 4 percent in after-hours trading on the news.

For the most part, it was business as usual for Google, though Google CEO Eric Schmidt has turned the earnings call with analysts over to CFO Patrick Pichette and Jonathan Rosenberg, senior vice president of product management at Google.

However, Schmidt noted in the press release:

"We saw strength in every major product area, as more and more traditional brand advertisers embraced search advertising and as large advertisers increasingly ran integrated campaigns across search, display, and mobile. We feel confident about our future, and plan to continue to invest aggressively in our core areas of strategic focus."

Google's positives for the quarter outside the numbers include a legal victory over Viacom, which sued Google and YouTube in a $1 billion copyright infringement grievance. Pichette said that defense cost Google $100 million in three years.

Google also successfully refreshed its search engine from front to back, upgrading the user interface and the indexing infrastructure to produce more polished results.

Google's optimism comes in the face of a standoff with China that threatened to stall Google's operations there; allegations of anti-competitive actions that are being studied by the European Commission; the failure of the Nexus One sold via Google's Webstore; and seemingly no cohesive plan to shore up its social networking front versus Facebook.

Google's biggest threat at this point is Apple, whose iPhone and iPad tablet threaten to pinch Google's mobile advertising opportunities on the Web. Google's Android platform is strong, but still trails far behind the hallowed iPhone, whose biggest threat appears to be itself thanks to faulty antennas.

However, ABI Research believes there is plenty of pie for everyone: $1.2 billion worth by 2015.

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