Google underscored my post yesterday on its leadership in the burgeoning Internet ad market when it announced spectacular quarterly earnings after the market close. Jonathan Berr at TheStreet.com says Google Blows the Doors Off:
Google walloped first-quarter earnings estimates Thursday, sending its shares up 6%.
For the quarter ended March 31, Google made $592 million, or $1.95 a share, up from the year-ago $369 million, or $1.29 a share. Gross revenue rose 79% from a year ago and 17% sequentially, to $2.25 billion.
“We basically have good news across the board,” CEO Eric Schmidt said on the company’s postclose conference call with investors.
“It looks like to us that we are continuing to gain market share,” Schmidt added.
Google-owned sites generated revenue of $1.30 billion, or 58% of total revenue. That’s up 97% from last year and up 18% sequentially. Google’s partner sites generated revenue, through AdSense programs, of $928 million, or 41% of total revenue. That’s up 59% year over year and up 16% increase sequentially.
Hit the link for the plaudits from fund managers, but basically Google exceeded already high expectations. Note also how important the 3rd party publishers are to the total. If there is a downside to it all, it is (as Ray Ozzie observed for Microsoft) that it takes money to make money in the ad-supported online services game:
Google continued to make substantial capital investments, mainly in computer servers, networking equipment and space for its data centers. It spent $345 million on these items in the first quarter, more than double the level of last year. Yahoo, its closest rival, spent $142 million on capital expenses in the first quarter.
Google has an enormous volume of Web site information, video and e-mail on its servers, Mr. Schmidt said. “Those machines are full. We have a huge machine crisis.”
Jordan Rohan, an analyst for RBC Capital Markets, called Google’s capital spending “unfathomably high,” noting that it spent the same percentage of its revenue on equipment as a company in the telephone business, an industry traditionally seen as far more capital-intensive than the Internet.
Nobody is complaining while the earnings stay high, though. Finally, on Internet advertising in general, the Interactive Advertising Bureau reported some new US numbers:
Internet advertising reached US$12.5 billion in 2005, up from $9.6 billion in 2004, a growth rate described in a statement as “tremendous” by the Interactive Advertising Bureau (IAB), which commissioned the study conducted by PricewaterhouseCoopers (PWC).
Still, Internet advertising made up only 4.7 percent of total ad spending in the U.S. in 2005. While this is an improvement over 2004, when Internet ads accounted for 3.7 percent of the overall market, it’s still small compared with other ad segments, such as direct mail ($56.6 billion), newspapers ($47.9 billion) and broadcast and syndicated television ($35 billion).
I guess junk mail is the target to shoot for! More details here.