Google delivers; Maybe paid clicks weren't such a big deal

Summary:Google on Thursday allayed concerns about its paid click growth rate with first quarter earnings that topped Wall Street's expectations. Google reported first quarter net income of $1.

Google on Thursday allayed concerns about its paid click growth rate with first quarter earnings that topped Wall Street's expectations.

Google reported first quarter net income of $1.31 billion, or $4.12 a share, on revenue of $5.19 billion. Excluding traffic acquisition costs (TAC) of $1.49 billion, revenue was $3.7 billion. Excluding charges Google's earnings were $1.54 billion, or $4.84 a share. According to Thomson Financial, Google was expected to report first quarter earnings of $4.52 a share on revenue of $3.6 billion.

The search giant's earnings results (statement and preview) include the operations of DoubleClick, but the company noted that the impact from its latest acquisition was immaterial for revenue and slightly dilutive on earnings.

On a conference call, CEO Eric Schmidt said: "It's clear to us that we're well positioned for 2008 and beyond" regardless of the economy. Schmidt said that Google has looked at the economic prospects, but Google isn't seeing anything worrisome. Get ready for some debate about whether Google is recession proof. Compared to a year ago, Google's revenue was up 42 percent.

Schmidt added that paid click growth of 4 percent in the first quarter from the fourth quarter was higher than Comscore noted. Paid clicks were up 20 percent from a year ago and 4 percent from the fourth quarter. Comscore had Google's first quarter paid click growth rate at 1.8 percent.

"We're showing fewer, but much better ads in each cycle," said Schmidt. He disputed that there was a dramatic deceleration in paid clicks. Schmidt added that paid clicks are just one factor in a push to improve quality of advertising on Google.

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Highlights from the conference call:

 

  • Schmidt wouldn't touch a question about Google's partnership with Yahoo and the implications. "On the Yahoo question, we are very excited to participate on the test," said Schmidt, who would obviously love to spoil Microsoft's bid for Yahoo. "It's nice to be working with Yahoo. We like them very much." How's that for a measured answer?
  • CFO George Reyes touched on the DoubleClick headcount reductions (10 percent in April) and noted that another 15 percent was expected to leave the company because they are in transitional roles. "To date there have been no headcount reductions outside the U.S.," said Reyes.
  • Sergey Brin, president of technology, noted that Google has delivered at least 1 search improvement a day, or 100 in the quarter. StreetView is deployed in 30 cities now.
  • Capital expenditures came in at $842 million in the first quarter. That's a lot of IT folks.
  • President of products Larry Page said 10 minutes of video is uploaded to YouTube every minute. Video ads performing better than banners.

By the numbers (revenue figures don't exclude TAC):

  • Google site revenue was $3.4 billion, up 49 percent from a year ago and 9 percent from the fourth quarter. Google network revenue (AdSense programs) was $1.69 billion, up 25 percent from a year ago.
  • International revenue was $2.65 billion, or 51 percent of total revenue. Google outlined what kind of bump it got from a weak dollar: "Had foreign exchange rates remained constant from the fourth quarter of 2007 through the first quarter of 2008, our revenues in the first quarter of 2008 would have been $18 million lower. Had foreign exchange rates remained constant from the first quarter of 2007 through the first quarter of 2008, our revenues in the first quarter of 2008 would have been $202 million lower."
  • Google generated cash flow of $1.78 billion in the first quarter, up from $1.69 billion in the fourth quarter.

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Topics: Google, Banking, Enterprise Software

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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