Google grows earnings, revenue in Q3 as ad sales accelerate

The company also topped Wall Street expectations

Google grew its sales and profits in the third quarter, exceeding Wall Street's expectations along the way, as the search company's advertising business continued on a strong growth path.

Google was going "gangbusters" during the quarter, Google CEO and co-founder Larry Page said in a conference call Thursday with financial analysts.

Google ended the quarter with revenue of US$9.72 billion, up 33 percent year on year, as both the price and volume of its pay-per-click ads increased. Subtracting commissions and fees paid to partners, revenue was $7.51 billion, exceeding the consensus estimate of $7.21 billion from financial analysts polled by Thomson Reuters.

The company had net income of $2.73 billion, or $8.33 per share, up from $2.17 billion, or $6.72 per share, in 2010's third quarter. On a pro forma basis, which factors in certain one-time items, net income was $3.18 billion, or $9.72 per share, beating the analysts' consensus expectation of $8.74 and exceeding the $2.46 billion, or $7.64 per share, in last year's third quarter.

Google's new social networking site, Google+, has amassed more than 40 million members, Page said, a figure he is satisfied with because it signals, in his view, that people are "flocking" to the site.

Google+ is important to the company because it will influence and improve Google's other products, Page said, as people use it to share content and interact.

Still, it remains to be seen if Google+ will draw a critical mass of users. It is still in its early days and faces a formidable rival in Facebook, whose membership recently topped 800 million people.

Data analytics company Chitika recently published results of a study that revealed that Google+ traffic has deflated, following a spike after the social networking service came out of a limited beta on Sept. 20.

At the time, traffic surged more than 1200 percent, according to Experian Hitwise. But traffic has fallen back to where it was before the site became widely available, Chitika data analyst Gabe Donnini said in a blog post titled "Failure to Launch: Google+ Growth Spurt Short Lived."

Facebook has become a threat to Google on various fronts. It is one of the world's most popular websites, but most of its content is off-limits to Google's search crawlers. Facebook is also a major advertising provider and has a tight partnership with Microsoft, one of Google's main rivals, which gets special access to Facebook data for its Bing search engine.

Page also revealed that mobile revenue, mostly from sales of mobile search ads, is at a $2.5 billion annualized run rate. Google's mobile business is under fire from Oracle, which filed a lawsuit alleging that the Android platform infringes on patents and copyrights Oracle acquired when it bought Sun Microsystems.

Nikesh Arora, a Google senior vice president and chief business officer, said sales were strong in all Google businesses, including its core desktop browser-based search advertising and emerging areas like mobile, display advertising and enterprise software, including Google Apps.

"We had a phenomenal third quarter," Arora said.

Google-owned sites generated 69 percent of total revenue. The company's international business accounted for 55 percent of all revenue.

Users clicked on Google-served ads 28 percent more times in the quarter, year on year, and the average fee paid by advertisers for each click rose 5 percent year on year.

Google finished the quarter with $42.6 billion in cash, cash equivalents and short-term marketable securities. Its global staff increased to 31,353 full-time employees, up from 28,768 full-time employees at the end of the second quarter.

This story, "Google grows earnings, revenue in Q3 as ad sales accelerate" was originally published by IDG News Service .

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