Google beats forecasts again - but it's searching for more

The search giant has posted impressive results, although they're still down on its glory years. And what's to become of YouTube?

by Emma Haslett
Last Updated: 24 Jan 2011
Google may be the world’s largest internet company, but that hasn’t stopped Wall Street types from grumbling lately that it’s not doing as well as it could be. But its latest figures may have put paid to those complaints: the internet giant made a net profit of $2.17bn (£1.4bn) in the three months to September 30, up from $1.6bn over the same period last year. Revenues have also jumped by almost a quarter, to $7.29bn – beating Wall Street expectations by almost $2bn. So it looks like full steam ahead again for Google – though it still has something to prove, particularly when it comes to some of its more controversial investments.

As usual, advertising was its big success story: apparently, the number of people clicking on its ads have increased by 16%, while a move into the display (i.e. banners, videos and interactive ads) market apparently means Google is on track to generate an extra $2.5bn a year. Nice - and the recent hike in charges for its more traditional AdWords won't have hurt overall revenues either.

Recently, investors have been fretting about Google's soaring cost base; the worry was that it was spending too much (particularly on people - it's taken on 1.500 people in the last few months) in its relentless search for more growth. Overall numbers like these will certainly scotch some of these complaints. But it was interesting that Google also published a 'one-time' snapshot of the progress of Android, its mobile operating system, which apparently now has a run rate (across all platforms) of more than $1bn.

So Google's strategy of giving away the software for free to mobile phone seems to have paid off – apparently, since its release two years ago, mobile search queries have increased five-fold. And according to CEO Eric Schmidt, ‘people who use Android search twice as much as [others], so clearly, there is more revenue associated with these searches’. Quite – though we’d imagine investors would still like some financial figures to back that up.

The only spanner in the works now is that while that 23% growth is impressive, it’s still a definite slowdown from earlier years (get out those violins). And while some of that is because it's been investing large amounts of cash in new projects ($5bn in sub-sea wind farm transmission lines, an indeterminate amount on driver-less electric cars and a $30m prize fund for the first company to successfully send a robot to the moon, to quote a few recent examples), it still refused to say whether YouTube, which it spent $1.6bn on in 2006, is profitable – despite apparently managing to monetize 2bn views of its videos a week. Then again, if anyone can afford to run a loss-making division, it's Google...

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