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 Technology News | July 2006 
Google Winning the Search Engine Wars
 Michael Liedtke - Associated Press
| | Logo of web search engine Google seen behing a computer keyboard. Internet giant Google reported its second-quarter earnings more than doubled as online advertising revenues rocketed. (AFP/Torsten Silz) |
San Francisco - Google Inc.'s second-quarter profit seems likely to erase any lingering doubts about which Internet company rules the Web.
While rivals eBay Inc. and Yahoo Inc. merely matched analysts' earnings expectations, Google on Thursday soared well beyond Wall Street's financial hurdle just like the online search engine leader has done in all but one quarter since it went public nearly two years ago.
"Google is clearly winning the battle," said Internet analyst Derek Brown of Pacific Growth Equities. "These are almost logic-defying results."
The Mountain View, Calif.-based company earned $721.1 million, or $2.33 per share, during the three months ended in June, more than doubling its net income of $342.8 million, or $1.19 per share, at the same time last year.
Excluding expenses for employee stock compensation and several other one-time items, Google said it earned $2.49 per share well above the average estimate of $2.22 per share among 32 analysts surveyed by Thomson Financial.
Google's search engine has been hitting on all cylinders for so long that investors almost seem to take its high-powered performance for granted.
It marks the seventh time in eight quarters as a public company that Google has beat Wall Street's expectations, even though its management insists the search engine isn't being steered by investors' relentless push for higher profit.
Revenue for the period totaled $2.46 billion, a 77 percent increase from $1.38 billion a year ago.
Google's revenue fell to $1.67 billion after subtracting commissions paid to its partners in the Internet's largest advertising network.
The post-commission revenue was $26 million above the average analyst estimate.
"It looks like our model continues to work very well," Google Chief Executive Eric Schmidt said during a Thursday conference call with analysts. "It's another good day and another good quarter for Google."
Brown thought that was putting it mildly. "This quarter should put to rest any questions about Google hitting some kind of wall" in its growth, Brown said. "They seem to be knocking all the walls down."
Yet the quarter wasn't enough to spur Google's stock to new heights. The company's shares fell $11.88 to close at $387.12 on the Nasdaq Stock Market, then crept up $2.78, or 0.7 percent, in extended trading. The stock price remains well below its record high of $475.11 reached in January.
Google's second-quarter contrasted sharply with both Yahoo, the owner of the Web's most visited site, and eBay, the largest e-commerce destination. Both matched expectations, but that's almost considered a letdown for rapidly growing Internet firms.
Yahoo compounded the disappointment over its results by postponing a key piece of advertising technology aimed at boosting its revenue and improving its competitive position.
Meanwhile, Google seems determined on widening its already formidable lead in Internet search.
In an interview Thursday, Schmidt said Google's engineers made 14 different changes to the search engine's formula during the second quarter in an effort to display more relevant ads and spur more revenue-generating clicks by Web surfers. "It is powering at full blast," Schmidt said of the search engine's advertising formula.
Through June, Google held a 44.7 percent share of the U.S. search engine market, up from 36.9 percent at the same time last year, according to comScore Media Metrix. Yahoo ranked a distant second at a 28.5 percent share, comScore said.
Google's Web sites also have been attracting more new users than Yahoo, Microsoft Corp. and Time Warner Inc. the owners of the Internet's most trafficked Web sites.
In the second quarter, Google's U.S. audience averaged 95.2 million per month, a 25 percent increase from last year, according to Nielsen/NetRatings Inc. Although they still ranked ahead of Google with average monthly audiences of more than 100 million, Yahoo, Microsoft and Time Warner only registered annual growth rates ranging from 4 percent to 9 percent.
Drawing more people to its site is important to Google because the company makes more money when ads are clicked upon there. Google generated $1.43 billion of its second-quarter revenue from activity on its own site, a 94 percent increase from last year.
Advertising wasn't the only factor lifting Google's second quarter profit. A slightly lower tax rate also helped. The second-quarter tax rate was 26 percent, below Google's estimated rate of as much as 30 percent for the entire year.
Because the company's tax rate was 27 percent during the first quarter, Google's rates will rise during the next six months if the full-year rate turns out to be as high as 30 percent. A higher tax rate would slow the company's earnings growth.
Judge to Weigh Google Click-Fraud Deal
Jill Zeman - Associated Press
Little Rock, Ark. - An Arkansas judge begins weighing objections this week to a $90 million class-action settlement between Internet search leader Google Inc. and advertisers who say they were victims of "click fraud."
Circuit Judge Joe Griffin has given preliminary approval to the settlement in the case against the search engine company, but at least 51 objections have been lodged over the agreement.
The two-day hearing begins Monday. Under the $90 million settlement of which a third will be awarded to lawyers thousands of advertisers worldwide will have a $60 million fund against which they can file a claim. No one will receive cash. Instead, the advertisers will receive advertising credits for future use with Google.
Lane's Gifts and Collectibles of Texarkana filed the lawsuit last year, alleging Google improperly charged advertisers for fraudulent Web site clicks that drove up advertising bills.
Advertisers say Google charged them for each click by a potential consumer that the advertisers allege were actually swindlers or mischief makers who repeatedly clicked on a link without a legitimate interest in the product or service.
Clicking on the ads, typically displayed at the top and sides of Web pages, triggered sales commissions even if the activity didn't lead to a sale. Click fraud cropped up several years ago as a way to drain advertising budgets or funnel illicit revenue to Web sites that belong to Google's network.
An independent report filed in court last week said that while Google appears to be doing reasonably well protecting advertisers from scam artists preying upon Internet advertisers, it remains unclear how much the system is being bilked under the ruse.
Since 2001, the ads have generated nearly $16 billion in revenue for Google and its partners, turning the Mountain View, Calif.-based company into one of the world's most prized businesses.
In the lawsuit, some advertisers have said the settlement shifts the burden of proof to class members because they'd have to certify the number of bogus clicks.
Google's attorneys have said the settlement is fair. |
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