Google Inc. rose the most in almost two years in Nasdaq trading after reporting quarterly sales and profit that topped analysts’ estimates, evidence the leader in Web search is benefiting from display and mobile advertising.
Net income rose 32 percent to $2.17 billion, or $6.72 a share, in the three months through Sept. 30, from $1.64 billion, or $5.13, a year earlier, Google said on its website. Sales, excluding revenue passed on to partner sites, were $5.48 billion, exceeding the $5.26 billion average of estimates compiled by Bloomberg.
Google is pursuing sources of revenue growth beyond search as it grapples with competition from Facebook Inc. and Microsoft Corp. Advertisers spent $6.15 billion in the U.S. on Internet ads in the third quarter, up 11.8 percent from the year-earlier period, according to EMarketer Inc.
“The digital economy is running on its own path,” Google Chief Financial Officer Patrick Pichette said in an interview yesterday. “It is growing very rapidly, and we are participating in that space.”
Google, based in Mountain View, California, rose $53.41, or 9.9 percent, to $594.34 at 9:42 a.m. New York time in Nasdaq Stock Market trading, the steepest jump since November 2008. The shares had dropped 13 percent this year before today.
Profit excluding some items was $7.64 a share, exceeding the $6.68 average of estimates compiled by Bloomberg.
Bottom Line
“They showed upside on the bottom line, which they haven’t done in a while,” said Aaron Kessler, an analyst at ThinkEquity LLC in San Francisco, who recommends investors buy the stock and doesn’t own it.
Paid clicks -- which relate to the number of times users click on an ad -- rose about 16 percent from a year earlier and about 4 percent from the second quarter. The cost per click increased about 3 percent from a year earlier and about 2 percent from the second quarter, Google said.
Cash and short-term investments totaled $33.4 billion at the end of the third quarter, Google said. It had $30.1 billion as of June 30, up from $26.5 billion at the end of March.
The results show “this continues to be a growth story when people didn’t think it was going to be,” said Gene Munster, an analyst at Piper Jaffray Cos. in Minneapolis, who has an “overweight” rating on Google stock. “Despite the fact that they haven’t been successful in emerging markets like China and Russia, Google is finding a way to grow its business.”
Display, Mobile
Google is seeking new revenue streams, including searches on mobile phones. Its Android software has surged in popularity among consumers, overtaking Research In Motion Ltd.’s BlackBerry to become the top smartphone operating system in the U.S. in the second quarter, according to research firm Gartner Inc.
Display revenue is on pace to top $2.5 billion annually, and mobile-ad sales should exceed $1 billion, Jonathan Rosenberg, senior vice president for product management, said on the conference call. CFO Pichette said there is some overlap in mobile and display advertising, though he called it “small.”
On Google’s YouTube video site, the number of videos being watched that can be monetized -- or targeted with ads -- exceed 2 billion on a weekly basis, up more than 50 percent from a year earlier, he said.
Google doesn’t typically reveal revenue rates for display and mobile.
“You guys often ask me, ‘Jonathan, where’s the next multibillion dollar business after search?’ There’s your answer,” he said on the call. “It’s display, and it’s already here clocking in at over $2.5 billion run rate. So clearly we’re firing on all cylinders in display.”
Market-Share Gains
After three months of market-share losses, Google boosted its U.S. search share in September to 66.1 percent from 65.4 percent a month earlier, according to researcher ComScore Inc. in Reston, Virginia. The gains came after Google unveiled its Instant service that gives users search results as they type in their queries.
Yahoo! Inc. fell to 16.7 percent from 17.4 percent, and third-place Microsoft edged up to 11.2 percent from 11.1 percent. Microsoft, based in Redmond, Washington, is merging its search operations with Yahoo this year to challenge Google’s dominance. Under the deal, Microsoft is providing its Bing search technology for Sunnyvale, California-based Yahoo’s sites.
Search-based advertising is the biggest piece of the U.S. Internet market, making up almost 49 percent of total online ad spending in 2010, according to EMarketer. Advertisers are expected to spend $12.4 billion on search advertisements, up from $10.7 billion in 2009.
There are opportunities for growth across the company’s businesses and it will continue to spend on areas such as mobile and display advertising, Pichette said.
“This is a well-managed company,” he said. “It’s investing because it sees massive opportunities all around it -- and why would we not take advantage of them?”
Net income rose 32 percent to $2.17 billion, or $6.72 a share, in the three months through Sept. 30, from $1.64 billion, or $5.13, a year earlier, Google said on its website. Sales, excluding revenue passed on to partner sites, were $5.48 billion, exceeding the $5.26 billion average of estimates compiled by Bloomberg.
Google is pursuing sources of revenue growth beyond search as it grapples with competition from Facebook Inc. and Microsoft Corp. Advertisers spent $6.15 billion in the U.S. on Internet ads in the third quarter, up 11.8 percent from the year-earlier period, according to EMarketer Inc.
“The digital economy is running on its own path,” Google Chief Financial Officer Patrick Pichette said in an interview yesterday. “It is growing very rapidly, and we are participating in that space.”
Google, based in Mountain View, California, rose $53.41, or 9.9 percent, to $594.34 at 9:42 a.m. New York time in Nasdaq Stock Market trading, the steepest jump since November 2008. The shares had dropped 13 percent this year before today.
Profit excluding some items was $7.64 a share, exceeding the $6.68 average of estimates compiled by Bloomberg.
Bottom Line
“They showed upside on the bottom line, which they haven’t done in a while,” said Aaron Kessler, an analyst at ThinkEquity LLC in San Francisco, who recommends investors buy the stock and doesn’t own it.
Paid clicks -- which relate to the number of times users click on an ad -- rose about 16 percent from a year earlier and about 4 percent from the second quarter. The cost per click increased about 3 percent from a year earlier and about 2 percent from the second quarter, Google said.
Cash and short-term investments totaled $33.4 billion at the end of the third quarter, Google said. It had $30.1 billion as of June 30, up from $26.5 billion at the end of March.
The results show “this continues to be a growth story when people didn’t think it was going to be,” said Gene Munster, an analyst at Piper Jaffray Cos. in Minneapolis, who has an “overweight” rating on Google stock. “Despite the fact that they haven’t been successful in emerging markets like China and Russia, Google is finding a way to grow its business.”
Display, Mobile
Google is seeking new revenue streams, including searches on mobile phones. Its Android software has surged in popularity among consumers, overtaking Research In Motion Ltd.’s BlackBerry to become the top smartphone operating system in the U.S. in the second quarter, according to research firm Gartner Inc.
Display revenue is on pace to top $2.5 billion annually, and mobile-ad sales should exceed $1 billion, Jonathan Rosenberg, senior vice president for product management, said on the conference call. CFO Pichette said there is some overlap in mobile and display advertising, though he called it “small.”
On Google’s YouTube video site, the number of videos being watched that can be monetized -- or targeted with ads -- exceed 2 billion on a weekly basis, up more than 50 percent from a year earlier, he said.
Google doesn’t typically reveal revenue rates for display and mobile.
“You guys often ask me, ‘Jonathan, where’s the next multibillion dollar business after search?’ There’s your answer,” he said on the call. “It’s display, and it’s already here clocking in at over $2.5 billion run rate. So clearly we’re firing on all cylinders in display.”
Market-Share Gains
After three months of market-share losses, Google boosted its U.S. search share in September to 66.1 percent from 65.4 percent a month earlier, according to researcher ComScore Inc. in Reston, Virginia. The gains came after Google unveiled its Instant service that gives users search results as they type in their queries.
Yahoo! Inc. fell to 16.7 percent from 17.4 percent, and third-place Microsoft edged up to 11.2 percent from 11.1 percent. Microsoft, based in Redmond, Washington, is merging its search operations with Yahoo this year to challenge Google’s dominance. Under the deal, Microsoft is providing its Bing search technology for Sunnyvale, California-based Yahoo’s sites.
Search-based advertising is the biggest piece of the U.S. Internet market, making up almost 49 percent of total online ad spending in 2010, according to EMarketer. Advertisers are expected to spend $12.4 billion on search advertisements, up from $10.7 billion in 2009.
There are opportunities for growth across the company’s businesses and it will continue to spend on areas such as mobile and display advertising, Pichette said.
“This is a well-managed company,” he said. “It’s investing because it sees massive opportunities all around it -- and why would we not take advantage of them?”
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