Google begins its earnings call for the fourth quarter of 2006 in about 10 minutes, but the earnings are out now. You’ll find them here from the US Security & Exchange Commission and here from Google itself. Further below, live blogging from the conference call, a formal transcript, a round-up of news articles and more.
From the release:
Revenues - Google reported revenues of $3.21 billion for the quarter ended December 31, 2006, representing a 67% increase over fourth quarter 2005 revenues of $1.92 billion and a 19% increase over third quarter 2006 revenues of $2.69 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs, or TAC.
Net Income – GAAP net income for the fourth quarter of 2006 was $1.03 billion as compared to $733 million in the third quarter. Non-GAAP net income was $997 million in the fourth quarter, compared to $812 million in the third quarter. GAAP EPS for the fourth quarter was $3.29 on 313 million diluted shares outstanding, compared to $2.36 for the third quarter, on 311 million diluted shares outstanding. Non-GAAP EPS for the fourth quarter was $3.18, compared to $2.62 in the third quarter.
We’ll postscript more as all the analysis begins to flow in. Conference call slides can be found here. Some charts from that:
Conference call info can be found here.
profit rises from Reuters notes shares dropped 3 percent apparently
because earnings were only in line with analyst expectations.
Google 4Q earnings nearly triple, AP: "The Mountain View-based company
said Wednesday that it earned $1.03 billion, or $3.29 per share, during the
final three months of 2006. That compared with net income of $372.2 million,
or $1.22 per share, at the same time in 2005. If not for expenses for employee
stock compensation and gains from tax benefits, Google said it would have
earned $3.18 per share. That figure easily exceeded the average analyst
estimate of $2.92 per share among analysts surveyed by Thomson Financial."
Google Posts Sharp Rise in Sales and Profits, New York Times
High Bar Hits Google, The Street: Covers how promoting Google Checkout cut
into ad revenues, how despite the great earnings, analysts still wanted more,
- Roundup Coverage At Techmeme
Live Blogging Highlights From Call
- Gaining shares in most countries, developing partnerships appropriate for a global company.
- Showing fewer ads per search but higher monetization. "Better return for advertiser; better return for us."
- Experimenting with new ad types, such as mobile.
- Partnerships a theme over the last quarter, partnerships announced over the year are now kicking in, such as China Mobile.
- Big priority is the issue of growing the company, taking learnings from US and UK mature markets and applying them elsewhere.
- Google has bigger mission now, advertisers using Google for all ads, vendors using Google Checkout, developers using Google as a platform
- Fourth quarter had strong traffic due to holiday shopping, as similar for past fourth quarters
- Google property revenue grew due to more traffic and better monetization
- AdSense gained from traffic from search partners and content partners doing better.
- New data on paid clicks out for this quarter. Grew 22 percent over last quarter, 61 percent over previous fourth quarter 2005.
- US traffic from holiday and retail area,
- 44 percent from outside US, with Germany and France doing especially well in retails. UK had a "typical" seasonal model of declining [NOTE FROM ME: last year was the first year this happened -- now it's apparently a seasonal thing].
- Traffic aquisition costs remained 31 percent as in the previous quarter but warns this might go up in the future due to partner pressure.
- Expect continued hiring and investments, especially capital investment
- Serving users is number one priority. "We know when we take care of our users, the entire Google ecosystem flourishes."
- Continuing to invest in search. Can now handle more user queries and respond more quickly, better results, better ranking, more pages (all the previous just stated as facts, not backed up), more content. Working on getting more blending into the main index, such as book results, and hope to go further with a "seamless" experience.
- 10,000 gadgets now available for home page.
- Users do multiple devices, so mobile is important
- Improved search quality in German and Japanese
- Russian, Denmark and Korea gained engineering offices
- Ad systems focused on increasing ad quality and eliminated ads from less commercial queries and increased for non-commercial ones. Percentage of queries with ads have gone down but monetization has improved
- Released landing page quality system
– lost the feed, sorry. damn british telecom! –
- Search is key, core to Google’s success
- Partnerships are growing
Responses To Questions
- Sergey says users are drawn to Google Checkout badges.
- Rosenberg says advertisers are getting better ROI and lowering costs with Checkout and that it facilitates the buying channel. "Most of them are beginning to think of Google as a buying channel rather than a marketing expense" [or the quote was very similar to that].
- Schmidt says 2007 is when mobile search queries will grow substantially, plus ads are used more in mobile, so revenue per search will be significantly higher on mobile devices.
- Schmidt primary focus with YouTube is growing audience rather than revenue. Chad Hurley cofounder of YouTube is pushing hard for revenue sharing with content partners. As for "fingerprinting" content to find infringement, they are rolling out stuff but still researching much of it.
- Kordestani says audio ads are being built out but early to tell full impact on financials "but we’re making great progress." Rosenberg says take up was robust in affiliate takeup, over 700 stations involved.
- Didn’t catch person answering — doing a lot to work with international partners and content partners to improve monetization of ads.
- Brin: Interested in health care based on requests from partners and others coming to Google suggesting work. "It’s not something that we’re looking to drive the ?P&L? with."
- Rosenberg: UK has been stronger than in the US for growth but see the seasonal drop in the fourth quarter, relates to UK vacations earlier and the finance vertical is more robust.
- Schmidt: People are pretty much the same around the world but differences due to underlying financials in different countries.
- Schmidt: Doesn’t want to comment on rumors of YouTube content deals before the purchase.
- Kordestani: As Google goes beyond search, focus is on helping advertisers manage ads in various mediums from one place.
- Rosenberg: Real time reports on where ads played big improvement on how normally it might take 12 weeks to get this. Same as with print in terms of getting a "kind of dashboard" that "most CMOs" would like.
- Schmidt? – Pushing hard on YouTube as a brand.
- Page: Trying to preserve the value of both Google Video and YouTube as brands.
- Schmidt: Could do ads pre-roll, post-roll on YouTube but could do contextual ads around the video. Experimenting with all this.
- Kordestani: Don’t break out growth on percentage of display ads placed through Google, only that the top 100 advertisers are experimenting
- Page: Have a way to go to promote personalization options at Google. Quality improvements with personalized search are significant and excited about that.
- Question: Want to go into TV ads, and will Google Video and YouTube allow? Schmidt, we’ve already said we’re experimenting with TV advertising. Looking to see if they can improve what others are already in. Setup boxes are IP targetable, so maybe can deliver even more targeted ads.