Google 4Q 2006: Revenue up 67% over 2005
Google reported Q4 2006 revenue today, announcing revenues of $3.21 billion, an increase of 67 percent compared to Q4 2005 and an increase of 19% compared to Q3 of 2006. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs, or TAC. In the fourth quarter of 2006, TAC totaled $976 million, or 31 percent of advertising revenues. $917 million of that was payments to AdSense publishers.
Larry: "Over time we will integrate the YouTube platform with our search engine."
Eric: Primary focus is user adoption, experimenting with ads. Chad has been pushing hard for a model where people who produce videos to be compensated in some form. Will see something with that this year.
Eric: "You should think of us as experimenting on using our targeting technology and tremendous reach to improve a good business. Targeting is more valuable to advertisers. Set-top boxes are now IP addressable."
Larry: "Well over half our traffic comes from international locations."
International revenue is 44 percent of total Google revenue. Experiencing good rates of growth in Ireland, Benelux, Eastern Europe, Asia, Pacific Region, Latin America and Brazil.
For the first time, Google released data on paid click rates. According to the release: "Aggregate paid clicks, which include clicks related to ads served on Google sites and our AdSense partners, increased approximately 61 percent over the fourth quarter of 2005 and approximately 22 percent over the third quarter of 2006."
Sergey: "The percent of queries that receive ads has gone down by several flights, but monetization has improved" due to better targeting after removing more ads from non-commercial searches.
Google is pleased with better than expected adoption rates. Google's TAC is likely to increase in 2007 due to credit card fees, among other things.
Revenue from mobile ads is "not significant today" and "you won't see its financial impact until '08," according to CEO Eric Schmidt.
Amit: Too early to tell impact on financials.
Sergey: "Our interest in health care is primarily driven by requests by governments and NGOs and universities...It's not something we're thinking of that we're looking to drive the P&O."