Google shares jump as results show ad strength

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Google shares jumped 7 per cent on Friday after the company reported gross revenues of $2.69bn in its third quarter, up 70 per cent on last time, underlining the enduring strength of its search engine advertising business model.

The figure beat Wall Street expectations of $2.62bn sales.

More than 99 per cent of Google’s revenues come from advertising based on its search technology.

Google’s shares on Friday climbed above $457 in morning trade, within reach of their alltime high in January of $475.11.

Its latest results showed sales were rising fastest on the more profitable Google-owned websites, up 84 per cent at $1.63bn. Network revenues increased by 54 per cent to $1.04bn, with much of this money being returned to the outside websites that feature its adverts.

These “traffic acquisition costs” increased from $785m in the second quarter to $825m and were 31 per cent of advertising revenues – a drop of one percentage point quarter-on-quarter.

Google’s strong revenues in a seasonally weaker quarter contrasted with those of Yahoo, which reported this week that revenues had risen grew only 19 per cent year-on-year.

Yahoo is far more dependent on display advertising and is facing increased competition from “social networking” sites such as MySpace and YouTube, which is being acquired by Google for $1.65bn.

Google captured 44.1 per cent of the US search market in August, according to comScore Networks research, compared with 28.7 per cent for Yahoo.

“Business is very very good here at Google and we had an excellent quarter in all respects,” Eric Schmidt, chief executive, told analysts in a conference call.

Profits of $812m or $2.62 a share beat the analyst consensus of $2.41 gathered by ReutersEstimates, up and rose from $1.51 last time. a year earlier.

Mr Schmidt said the overall growth had been driven by a number of factors.

These included strong user growth, improvements in the quality of search, better quality ads and ad products, and “a blizzard of new product launches [that] seems to create new opportunities for us every day”.

Google’s international business had also performed well, he said. Revenues from outside the US were now 44 per cent of total revenues, up from 39 per cent a year ago.

Its largest markets – the UK and Germany – had performed very well, as had the Netherlands, Spain, France, Italy, Canada and Australia. The emerging markets of India and Brazil were also growing at “very high rates”.

Mr Schmidt said partnerships with Dell, eBay, Intuit, MTV and MySpace would prove important in growing revenues and deepening Google’s reach for advertisers.

The acquisition of YouTube, the leading online video-sharing site, was a culmination of this strategy and “the ultimate partnership, if you will”, he said.

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