Google 3Q Tops out Analyst Expectations

By Steve Bryant  |  Posted 2006-10-19 Print this article Print

Google almost beat the street's expectations today, reporting a 92% increase in quarterly profits, near the top of analyst expectations. Google reported 3Q net income of $733.4 million, up from the year-earlier quarter's $381.2 million. Google reported revenues of $2.69 billion, an increase of 70% compared to 3Q 2005 and an increase of 10% compared to 2Q 2006. Net income was $733 million as compared to $721 million in the second quarter.

Note that Google reports its revenues without deducting traffic acquisition costs (TAC).  In 3Q 2006, TAC totaled $825 million, or 31% of advertising revenues.  

Wall Street analysts had projected revenue, excluding what Google pays to AdSense publishers, to rise about 66 percent from a year ago to about $2.62 billion. Forecasts ranged between $2.48 billion and $2.76 billion.

"Business is very very good here at Google, and we had an excellent quarter in all respects," said CEO Eric Schmidt, who touted strong user growth, better ads, diversity of the business, strong product launches and multiple partnerships as the reason for Google's success.

Schmidt emphasized the company's blizzard of product launches, which he said were "unprecedented in their scale and confusing to almost everyone." Schmidt noted Google's partnerships with eBay, Viacom, Fox Myspace, and Intuit were all very successful. Those partnerships culminated in the purchase of YouTube, he said, characterizing that deal "as the ultimate partnership, if you will."


Google-owned sites generated revenues of $1.63 billion, or 60% of total revenues, an 84% increase over 3Q 2005 revenues of $885 million and a 14% increase over 2Q 2006 revenues of $1.43 billion.

Google's AdSense programs generated revenues of $1.04 billion, or 39% of total revenues, a 54% increase over network revenues of $675 million generated in 3Q 2005 and a 4% increase over 2Q 2006 revenues of $997 million.

Current Traffic Numbers
Web traffic to Google grew 22% from Q3 2005 to Q3 2006, increasing from a 3-month average monthly unique audience of 80.3 million to 98.4 million, according to Nielsen//NetRatings.  Google search also accounted for about half of all Internet searches in September 2006 with 2.8B queries.

Yahoo is second in search, owning 23.4% of the market. Windows Live Search is third with 9.2%, although their share has decreased 12% year over year. Fifth-ranked owns 2.7% of the search market and have grown 19% year over year. |

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