Google Has “Stabilized,” Reports $5.5 Billion In Q2 Revenues

Google just reported second quarter earnings of $5.52 billion, representing “an increase of 3% compared to the second quarter of 2008.” The first quarter of 2009 was $5.51 billion, by comparison. So growth was flat quarter over quarter. According to Google CEO Eric Schmidt, Google’s business has “stabilized” and has seen growth in certain areas in the midst of a still-bad economy.

Below are excerpts from the press release and the earning slides. We’ll update the post after the earnings conference call, which is about to start.

Revenues – Google reported revenues of $5.52 billion in the second quarter of 2009, representing a 3% increase over second quarter 2008 revenues of $5.37 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

Google Sites Revenues – Google-owned sites generated revenues of $3.65 billion, or 66% of total revenues, in the second quarter of 2009. This represents a 3% increase over second quarter 2008 revenues of $3.53 billion.

Google Network Revenues – Google’s partner sites generated revenues, through AdSense programs, of $1.68 billion, or 31% of total revenues, in the second quarter of 2009. This represents a 2% increase from second quarter 2008 network revenues of $1.66 billion.

International Revenues – Revenues from outside of the United States totaled $2.91 billion, representing 53% of total revenues in the second quarter of 2009, compared to 52% in the first quarter of 2009 and second quarter of 2008 . . .

Revenues from the United Kingdom totaled $715 million, representing 13% of revenues in the second quarter of 2009, compared to 14% in the second quarter of 2008.

Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 15% over the second quarter of 2008 and decreased approximately 2% over the first quarter of 2009.

Cost-Per-Click – Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our AdSense partners, decreased approximately 13% over the second quarter of 2008 and increased approximately 5% over the first quarter of 2009.

TAC – Traffic Acquisition Costs, the portion of revenues shared with Google’s partners, decreased to $1.45 billion in the second quarter of 2009, compared to TAC of $1.47 billion in the second quarter of 2008. TAC as a percentage of advertising revenues was 27% in the second quarter of 2009, compared to 28% in the second quarter of 2008.

The majority of TAC is related to amounts ultimately paid to our AdSense partners, which totaled $1.24 billion in the second quarter of 2009 . . .

As of June 30, 2009, cash, cash equivalents, and short-term marketable securities were $19.3 billion.

On a worldwide basis, Google employed 19,786 full-time employees as of June 30, 2009, down from 20,164 full-time employees as of March 31, 2009.

Here are selected comments and observations from the earnings call and Q&A:

Product SVP Jonathan Rosenberg: We’re increasingly focused on “power searchers” who use longer queries and have greater expectations. Search Options is directed to that group. Rosenberg went down a list of launches or product improvements for mobile, email, apps, Google Labs, Google Wave, and others.

Q: Mobile vs. PC  – are there PPC revenue differences? What about Bing?

Schmidt: We’re showing the desktop ads on the high end mobile browsers; it’s the same auction. Over time mobile should perform better.

Rosenberg: Mobile complements PC search. People tend to search on mobile when they’re away from their desks. On the second question (Bing), Rosenberg said it’s too early to tell but “we certainly haven’t seen” any market share erosion.

Q: What factors or variables do you look at in saying that the business has stabilized?

Schmidt: Shopping and travel appear to have recovered.

Q: Real time and vertical search and Google’s attitudes toward both

Rosenberg: there’s a lot of room to get incremental monetization gains where you can qualify the leads for the advertiser (as in vertical search). Schmidt didn’t rule out more verticals for Google but expressed a general bias against them.

Q: Range of questions surrounding Chrome OS

Schmidt: We’re talking to PC hardware makers to design products that are “very very exciting.” Other elements of our strategy remain to be worked out. Our focus however will be speed and the seamless integration and use of web services that are the promise of cloud computing.

Q: YouTube monetization

Nikesh Arora, President, Global Sales: We’re seeing high sell through of the YouTube homepage and increasing interest in pre-roll.

In general this should be regarded as a very strong performance and quarter for Google, under the circumstances, in the midst of a recession that is still in force for most people and businesses.