Google Q3 profit skyrockets 92%

Revenue up 70% as firm capitalizes on online ads

Shares of Google Inc. soared as much as $32 a share in after-hours trading Thursday when the company reported third-quarter earnings that reflect, by some estimates, that the firm is grabbing a quarter of all the money flowing into online advertising.

Google's profit of $733.4 million rose 92% compared with the same quarter a year ago. Revenue rose 70% to $2.7 billion, topping analysts' estimates of $2.6 billion.

When traffic-acquisition costs are stripped out, Google posted $1.87 billion in revenue, besting estimates of $1.81 billion.

According to eMarketer Inc., the U.S. Internet-advertising business will grow 27% this year to $16 billion. Google, which makes more than half its revenue from the U.S. online ad market, already has posted $7.4 billion in revenue this year, with one quarter remaining.

Google's results were in stark contrast to those of Yahoo! Inc. on Tuesday. Yahoo! matched expectations after lowering them weeks ago, then offered lackluster forward guidance. Google, as is customary, did not provide guidance.

On a per-share, adjusted basis, Google earned $2.62, about 20 cents better than analysts' forecast.

CEO Eric Schmidt said Google's strong results can be traced to a number of factors, including user growth, better ad quality, the diversity of its customer base and a "blizzard of new launches." As to the latter, he said that so many new products can be confusing, though they "open up new opportunities every day."

Sites owned by Google, such as Google.com and Froogle.com, accounted for 60% of total revenue in the quarter, while 39% was generated by partner sites. International revenue accounted for 44% of the total, up from 42% in the second quarter and 39% in the third quarter last year.

The company added 1,436 full-time employees during the quarter, totaling 7,942, and executives said more hires are coming. Capital expenditures were $492 million in the quarter, and executives said the 2006 capex growth rate will be "substantially greater" than its revenue growth rate.

"We want to be the easiest company in the world for advertisers to do business with," co-founder and president of products Larry Page told analysts during a conference call Thursday.

Addressing Google's pending $1.65 billion acquisition of YouTube, co-founder and president of technology Sergey Brin said that sometimes the best answer to an Internet query is a video, not a text Web page.

Building on that theme, senior vp global sales and business development Omid Kordestani touted "great success" with Google's video ads. "There's a lot of momentum here," he said. "A lot of learning here and a lot of revenue here."

Shares of Google, which rose 1.6% during the regular session Thursday, surged as much as 7% in after-hours trading.
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