Updated to include earnings call: Based on its preferred GAAP standards, Google reported earnings $1.32 per share on revenues of $1.578 billion, up 96 percent from 3Q04 and 14 percent from 2Q05. The GAAP net income — that’s after stock compensation and other charges are removed — was $381 million, up 11 percent from $343 million the previous quarter.
Some highlights: Google-owned site revenues continued to grow faster than then that of the Google Network, generating $885 million, or 56% of total revenues, up 20 percent from 2Q05. The network turned in 43 percent of the total — $675 million — through AdSense but only a 7-percent increase over 2Q05.
– The traffic acquisition costs (TAC) — the amount the parners make — increased to $530 million from $494 the previous quarter. The shift to an emphsasis on making money through its own sites reduced TAC to 34 percent of advertising revenues, down 2.1 percent.
– Revs from outside the US failed to grow as a percentage of the total: 39 percent for 3Q05 and 2Q05.
From the earnings call: My theory … if you care a lot about the difference between GAAP and pro forma, this isn’t your primary source for Google financials. FYI, the issue was addressed as the call began. Here’s what caught my attention during the hour-plus session with analysts and including Chairman and CEO Eric Schmidt, co-founders Sergey Brin and Larry Page, and several other top Google execs.
Advertising: Brin reported that Google continues to test the placement of ads from its network into print publications; ads currently are in PC Magazine and Maximum PC: “Hundreds of other publications have expressed interest. in participating.” International expansion continues with sales offices planned in Tel Aviv and Poland. He emphasized renewal of 20-plus partnerships to distribute AdSense and search services.
AOL: Schmidt declined to comment on the rumors but took the opportunity offered by a question to make a public pitch based on loyalty: “Of course, I can’t comment on any rumors. I will tell you AOL has been our longest and, in many ways, tightest partner for many, many years. We have teams that collaborate on a wide variety of activities. They have expanded on their base. We see advertisers together. There are a number of areas of technology involving advertising and video and so forth that have been collaborative in nature and that work continues and we hope it will continue for many, many years. They’re a very, very valued partner and we hope it will be true forever.”
Google Print: As the storm rages, Page tried once again to define Google Print as “an effort to create a giant car catalogue of books online. Google Print search results only show snippets of a book unless we have the publisher”s or author’s permission to show more. This effort will ultimately help authors and publishers sell more books, and users everywhere find the information they’re looking for.”
Google’s role: Schmidt: “I encourage you to view our results as driven by a business model for innocent and seamless access to the world’s information, driven by the most complete set of information.”
New product strategy: Schmidt: “It’s obvious that instant messaging and voice over IP are going to become very, very significant components of people’s online experience. Google … has a product in that area called Google Talk … which looks like it is doing extremely well. It may be helpful to say right at the top that we don’t do the same thing everyone else does, so if you try to predict our product strategy by simply saying so-and-so has ‘a this’ and Google will do the same thing, it’s almost always a wrong answer. We look at markets as they exist and we assume they’re served pretty well by their existing players. We try to see new problems in new markets using the technology that others use and that we build.”
Earnings release | Webcast
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