Ad familiarity breeds content for Google

A growing familiarity with search engine advertising in international markets, including a new burst of growth in the UK, contributed to another quarter of outperformance at Google, figures released on Thursday showed.

While big acquisitions and moves into new online services have grabbed the headlines in recent months, Google executives used news of the first-quarter earnings to try to bring attention back to the company’s core search-engine operations.

“The most important thing is that the core business is really strong,” said Eric Schmidt, chief executive, adding that this “allows us to take calculated risks in new markets”.

Google’s share price has been becalmed since the start of last year amid concerns that some of its initiatives in new markets, such as its attempts to attract TV companies as partners for YouTube, are not paying off.

However, the continued powerful growth in search advertising lifted revenues and earnings ahead of market estimates.

“We’re still at the beginning of that business,” said Mr Schmidt, dismissing suggestions that Google would soon start to run into limits in the size of the market.

“It’s a huge business – we have lots of room to grow there.”

After deducting the traffic acquisition costs it pays to other websites that carry its advertising, Google’s revenues jumped 65 per cent to $2.53bn, up $1bn from a year before and slightly ahead of Wall Street forecasts. International business grew by 81 per cent and accounted for 47 per cent of total revenues, up from 42 per cent a year ago.

Net income climbed to $1bn, or $3.18 a share. On the pro forma basis on which Wall Street judges the company, earnings reached $3.68 a share, compared with expectations of $3.31.

“The global growth strategy of Google continues to work very very well”, with newer international markets learning from the experience of more developed markets, Mr Schmidt said.

In the UK, its biggest overseas market, Google said that a seasonal jump in travel and financial services advertising had driven a revival of growth from the previous three months. UK revenues were $578m, or 16 per cent of the total, it added.

Google also named Mr Schmidt chairman of the company, ending its unconventional practice of not operating with a formal chairman. The lack of a chairman had accentuated the unusual triumvirate in charge of the company, with Mr Schmidt working alongside founders Sergey Brin and Larry Page.