Google’s Profit Increases as Ad Market Shows Signs of Recovery

Google’s Profit Increases as Ad Market Shows Signs of Recovery


Oct. 15 (Bloomberg) -- Google Inc. reported a 27 percent increase in third-quarter profit, beating analysts’ estimates, after the recovering economy boosted demand for online ads and e-commerce. The shares gained in late trading.

Net income rose to $1.64 billion, or $5.13 a share, from $1.29 billion, or $4.06, a year earlier, the company said today in a statement. Excluding revenue passed on to partner sites, sales were $4.38 billion, compared with an estimate of $4.25 billion in a Bloomberg survey of analysts.

Search advertising, Google’s main source of revenue, rebounded last quarter as marketers sought a cost-effective way to promote themselves. Spending on U.S. search ads rose 5 percent from the previous period, according to Efficient Frontier, a search marketing firm in Sunnyvale, California. The number had dropped 3 percent in the second quarter.

“Advertisers want to stay in front of people who are spending,” said Sameet Sinha, an analyst with JMP Securities LLC in San Francisco, who rates the stock a buy and doesn’t own it. “They are willing to pay up for it.”

Leaving out some costs such as stock-based compensation, profit was $5.89 a share. Analysts had estimated $5.43.

Google, the most used Internet search engine, rose $7.76 or 1.5 percent, to $537.67 in extended trading, after closing at $529.91 on the Nasdaq Stock Market. Shares of the Mountain View, California-based company have climbed 72 percent this year.

Worst Is Over?

Chief Executive Officer Eric Schmidt said this month that the “worst is behind us.” He also has said that Google will step up acquisitions again as the economy improves.

Google eliminated jobs and shuttered underperforming business units this year. In March, the company cut about 200 sales and marketing positions, or 1 percent of its workforce.

Even as companies pared marketing budgets, Google benefited from a shift to online ads from traditional media. Search advertising will grow 3.6 percent in the U.S. this year, while the entire ad industry declines 15 percent, according to Magna Global in New York.

Google has maintained its dominance in the Internet search market this year, warding off an attack from Microsoft Corp.’s Bing, which debuted in June.

Microsoft is joining forces with Yahoo! Inc. to form a bigger search competitor to Google. The partnership, slated to take effect next year, would put Bing on Yahoo’s Web sites.

Google had 64.9 percent of the U.S. market last month, compared with 65 percent in May, according to ComScore Inc. in Reston, Virginia. Microsoft’s share grew to 9.4 percent from 8 percent over that period -- mostly at the expense of Yahoo, which fell to 18.8 percent from 20.1 percent.

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