Google Reports Revenues Up 19 Percent From Previous Quarter

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.

Conference call info can be found
here.

Articles:

• Google
  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

Below is from me. Also see live blogging from Business 2.0
here.
For a full, formal transcript, one is now available
here from
SeekingAlpha.

Schmidt:

• 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

Reyes:

• 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

Page

• 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

Brin

• 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! —

Schmidt

• 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.