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.

Full details are available on Google's Web site. Notes from the call: YouTube
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. All sorts of ways to monetize. Eric: "We know that people who use YouTube are very fanatical about it" and that those are the types of people who the copyright holders are trying to reach. There are several ways to connect these two groups. "We can also do advertising." What we're doing now is encouraging content owners to submit their content to us and then measure the number of viewers who see it. There are also all sorts of ways to link our advertising systems to theirs. Contextual advertising around videos is also a possibility. Fingerprinting: We want to respect the ownership issues. Fingerprinting is one way. Ads: Pre-rolls have traditionally not worked. We're looking at alternatives. The real value of copyrighted works is we're talking to their fans. That's attractive to the copyright holder. Eric: Won't comment on YouTube's October 2006 content deals. Important that those deals be done at that time for strategy purposes for both YouTube and Google. Larry: "We're taking the time to do the integration so we preserve the value of both Google Video and YouTube." We haven't traditionally hired a huge amount of people to create content, we've relied on our users. Google TV
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." International Growth
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. Jonathan: Monetization differences...UK is often stronger than U.S., except for the holiday season. On the European continent, monetization goes down a bit. Very high in Germany. Haven't broke down any color on ranking countries. Eric: People are the same everywhere, the only difference is GDP growth, the economy, etc. Paid Clicks
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." AdSense
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. Checkout
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. Mobile
Revenue from mobile ads is "not significant today" and "you won't see its financial impact until '08," according to CEO Eric Schmidt. DMarc
Amit: Too early to tell impact on financials. Health Care
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."