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Google Propelled By Quality In Q3 2006

By: David Utter

Revenue and earnings leaped for Google in its financial third quarter as the company continued to reap billions from its online advertising business.

Google Propelled By Quality In Q3 2006The numbers from Google (GOOG) as reported in their third quarter financial report will likely have investors joyfully pushing shares of the stock upward in the morning. Google closed at 426.06 ahead of its announcement.

Company revenue of $2.69 billion for the quarter represented a 70 percent increase year-over-year. GAAP net income hit $733 million, and the company reported $10.4 billion in cash, equivalents, and marketable securities for the period.

"Our third quarter results are a testament to the strength of our network of advertisers and partners, as well as our continuing focus on users," said Eric Schmidt, CEO of Google. "We were particularly pleased with the contributions of our international business in a seasonally weaker quarter."

Those international revenues contributed 44 percent of Google's third quarter totals. Through its network and partner sites, Google took in $1.04 billion in revenue, and paid $780 million to its partners. Google sites generated $1.63 billion in revenue themselves.

Google shared its largess with a trio of big name music labels. The Wall Street Journal named Warner Music Group, Vivendi SA's Universal Music Group, and Sony Corp. and Bertelsmann AG's Sony BMG as recipients of shares in YouTube.

Google purchased the video sharing site for $1.65 billion in stock, and the equity stakes mentioned above likely helped stave off the multitude of copyright infringement lawsuits some expected to besiege YouTube due to the activities of the site's users. Universal Music pointedly ignored YouTube when it sued a pair of video sites over copyright issues.

Shareholders in the company have seen Google accomplish what its closest paid search competitor, Yahoo, and other fail to do. Google still delivers relevant advertising to searchers on its sites, to the point where it complements the results as well as accompanying them.

Google made other quality-related changes behind the scenes earlier in the year. Keyphrases available for purchase through its auction-based ad system jumped up in cost for advertisers who Google felt were not providing a quality landing page experience for people who clicked on those ads.

To maintain a presence in Google AdWords became more expensive for those marketers. The change definitely generated some ill-feelings toward Google, as evidenced by posts we noted on WebProWorld. But as long as Google remains the search engine of choice for millions, those customers will just have to give up some of their profit margins to stay in the game.


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