Last quarter Google shocked the world – not with their success, but with a failure. Much to the surprise of analysts and others’ they stumbled and failed to meet second quarter earnings expectations in July. The numbers were good, just not as high as the stratospheric expectations being asked of them. It was only the second time since going public in 2004 they’d come up short. So Thursday, rebuked for aiming too high last time (Google doesn’t give sales or earnings guidance) analysts were watching carefully to see if their picks were better when Google announced this quarters results.
Was last quarter a fluke of mismanagement? A rogue wave to an otherwise steady ship? Were analyst’s just too optimistic? Investors who bid up the stock 19% during the last month haven’t thought so. They’ve expected a windfall. Today, they all got their answer: all’s well in Mountain View.
Despite occasional criticism for being a “one trick pony” and deriving most of their revenue from one advertising strength, Google proved that pony still has plenty of speed and strength. Though nearly two thirds ($2.73b) in revenue came from search related activity on Google’s own sites, the company handedly beat expectations.
Revenue for the third quarter, less commissions to advertising partners, was in at $3.01b, substantially higher than consensus estimates. Net income was $1.07b ($3.38/share) up from $733.4m ($2.36/share) for the same period last year. 3rd quarter profit was up 46%.
Search remains the core of Google’s strength. Not only did it account for much of revenue, but in September Google accounted for 57% of all U.S. web searches (ComScore), a huge advantage over their closest rival.
In sign of future growth expectations, during the 3rd quarter Google also added more than 2,000 new employees, some of whom are focused on new market opportunities. Among them, International markets are an increasing focus, as are forays into wireless (Google will reportedly bid on wireless spectrum) and increased emphasis on video, especially opportunities in Internet video advertising.
Expansion of their thus far comparatively minor (versus Yahoo or Microsoft) display ad business is also a priority but their purchase of DoubleClick has remained under FTC review since May, even as rival deals have cleared. Whispers are that the deal will finally get the go ahead soon but there’s no confirmation or news just yet. (And even once approved in the U.S. European approval may be less forthcoming).