Google published its 2006 Q3 earnings results yesterday which helped to fortify Google’s dominance of web search, search engine marketing, and online advertising as a whole.
Google quarterly profit almost doubled in Q3, with an increase of 92% while gross revenue rose 70% to $2.69 billion.
“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. In addition, we continued to forge significant partnerships with companies such as eBay, Fox Interactive Media, and Intuit that will be of great value to all involved.”
Here’s an overview of where that revenue came from:
Google Sites Revenues – Google-owned sites generated revenues of $1.63 billion, or 60% of total revenues, in the third quarter of 2006. This represents an 84% increase over third quarter 2005 revenues of $885 million and a 14% increase over second quarter 2006 revenues of $1.43 billion.
Google Network Revenues – Google’s partner sites generated revenues, through AdSense programs, of $1.04 billion, or 39% of total revenues, in the third quarter of 2006. This is a 54% increase over network revenues of $675 million generated in the third quarter of 2005 and a 4% increase over second quarter 2006 revenues of $997 million.
International Revenues – Revenues from outside of the United States contributed 44% of total revenues in the third quarter of 2006, compared to 42% in the second quarter of 2006 and 39% in the third quarter of 2005. Had foreign exchange rates remained constant from the second quarter through the third quarter of 2006, our revenues in the third quarter of 2006 would have been $19 million lower. Had foreign exchange rates remained constant from the third quarter of 2005 through the third quarter of 2006, our revenues in the third quarter of 2006 would have been $35 million lower.
Greg Sterling has highlighted some of the conference call which was transcribed by Seeking Alpha:
A comment from Sergey Brin re all the product launches and integration those products:
What we are concerned about is that if we continue to develop so many new individual products that are all their assorted silos, you will have to essentially search for our products before you can even use them. And then you will have to search before you can do a search, in many cases.
Instead what we’re doing now is we are trying to create the horizontal functionality across a range of products, across media types and so forth. For example, I mentioned already Google Apps for Your Domain, and that in a sense is a product, but really it just combines a whole bunch of other offerings together, seamlessly integrated together so they can work well for an organization.
Another example which we haven’t gotten quite up and running yet, but when you want to share your documents or your pictures or your videos, it would be nice to have the exact same way to share all those things, to have all that functionality available across all of those media types in the identical way, rather than developing sort of one-offs for each of those products.
There’s a whole set of initiatives that’s now going on in the Company to make our product offerings simpler and more consistent for all of our users.
Jonathan Rosenberg on AdWords “Starter Edition”:
So basically the AdWords Starter Edition is an alternative version of AdWords, and it’s a lot easier for novices to get into search advertising. It’s got a much simpler UI. I’m not sure in terms of color how much I can offer you. We have been using it extensively. We have been tracking the percentage of advertisers who start with AdWords Starter Edition who then actually are successful in getting their work to manifest itself in the form of a working campaign; and who then continue to opt into our ad systems.
We are doing much, much better there on a percentage basis in terms of getting the advertiser signed up. So in that sense, it has been successful. We are also then getting a number of those advertisers using AdWords itself. So the take rates are strong.
Jonathan Rosenberg again, on Local:
On the local side, I think we have seen very strong organic growth in local searches. A lot of this is particularly fueled by Maps usage and the growth in the Maps’ API and Google Earth downloads. I think there is a very, very strong ecosystem that has developed there around our API.
When you think about that, Larry mentioned in his prepared remarks, I think, that 50% of small businesses believe they can use the Internet for their marketing and sales, but 50% of them don’t have websites. So the real big win there I think may come from some of the work that we’re doing with Intuit with the QuickBooks 2007 integration. That will make it very, very easy for businesses to host pages, create them, set up a site, and then generate ads.
But if you want to check some out, type polo store, New York City. You can also a look at some of the printable coupons that Larry mentioned if you type in “carwashes in Mountainview”.
Mark Rowen – Prudential
And how are some of the monetization efforts in local going? I know you were doing some testing with some retailers, putting their names in the bullets on the Maps and things. Can you talk about that at all?
It is a real portion of our revenue. I can’t give you specifics in terms of percentages, but it is one of the things that we are tracking very, very carefully and that is reasonably significant at this point.