Google begins its earnings call for the fourth quarter of 2006 in about 10
minutes, but the earnings are out now. You’ll find them
here from the US Security & Exchange Commission and
here from Google
itself. Further below, live blogging from the conference call, a formal
transcript, a round-up of news articles and more.
From the release:
Revenues – Google reported revenues of $3.21 billion for the quarter
ended December 31, 2006, representing a 67% increase over fourth quarter 2005
revenues of $1.92 billion and a 19% increase over third quarter 2006 revenues of
$2.69 billion. Google reports its revenues, consistent with GAAP, on a gross
basis without deducting traffic acquisition costs, or TAC.Net Income – GAAP net income for the fourth quarter of 2006
was $1.03 billion as compared to $733 million in the third quarter. Non-GAAP net
income was $997 million in the fourth quarter, compared to $812 million in the
third quarter. GAAP EPS for the fourth quarter was $3.29 on 313 million diluted
shares outstanding, compared to $2.36 for the third quarter, on 311 million
diluted shares outstanding. Non-GAAP EPS for the fourth quarter was $3.18,
compared to $2.62 in the third quarter.
We’ll postscript more as all the analysis begins to flow in. Conference call
slides can be found
here.
Conference call info can be found
here.
Articles:
- Google
profit rises from Reuters notes shares dropped 3 percent apparently
because earnings were only in line with analyst expectations.
Google 4Q earnings nearly triple, AP: “The Mountain View-based company
said Wednesday that it earned $1.03 billion, or $3.29 per share, during the
final three months of 2006. That compared with net income of $372.2 million,
or $1.22 per share, at the same time in 2005. If not for expenses for employee
stock compensation and gains from tax benefits, Google said it would have
earned $3.18 per share. That figure easily exceeded the average analyst
estimate of $2.92 per share among analysts surveyed by Thomson Financial.”
Google Posts Sharp Rise in Sales and Profits, New York Times
High Bar Hits Google, The Street: Covers how promoting Google Checkout cut
into ad revenues, how despite the great earnings, analysts still wanted more,- Roundup Coverage
At Techmeme
Live Blogging Highlights From Call
Below is from me. Also see live blogging from Business 2.0
here.
For a full, formal transcript, one is now available
here from
SeekingAlpha.
Schmidt:
- Gaining shares in most countries, developing partnerships appropriate for
a global company. - Showing fewer ads per search but higher monetization. “Better return for
advertiser; better return for us.” - Experimenting with new ad types, such as mobile.
- Partnerships a theme over the last quarter, partnerships announced over
the year are now kicking in, such as China Mobile. - Big priority is the issue of growing the company, taking learnings from US
and UK mature markets and applying them elsewhere. - Google has bigger mission now, advertisers using Google for all ads,
vendors using Google Checkout, developers using Google as a platform
Reyes:
- Fourth quarter had strong traffic due to holiday shopping, as similar for
past fourth quarters - Google property revenue grew due to more traffic and better monetization
- AdSense gained from traffic from search partners and content partners
doing better. - New data on paid clicks out for this quarter. Grew 22 percent over last
quarter, 61 percent over previous fourth quarter 2005. - US traffic from holiday and retail area,
- 44 percent from outside US, with Germany and France doing especially well
in retails. UK had a “typical” seasonal model of declining [NOTE FROM ME: last
year was the first year this happened — now it’s apparently a seasonal
thing]. - Traffic aquisition costs remained 31 percent as in the previous quarter
but warns this might go up in the future due to partner pressure. - Expect continued hiring and investments, especially capital investment
Page
- Serving users is number one priority. “We know when we take care of our
users, the entire Google ecosystem flourishes.” - Continuing to invest in search. Can now handle more user queries and
respond more quickly, better results, better ranking, more pages (all the
previous just stated as facts, not backed up), more content. Working on
getting more blending into the main index, such as book results, and hope to
go further with a “seamless” experience. - 10,000 gadgets now available for home page.
- Users do multiple devices, so mobile is important
- Improved search quality in German and Japanese
- Russian, Denmark and Korea gained engineering offices
Brin
- Ad systems focused on increasing ad quality and eliminated ads from less
commercial queries and increased for non-commercial ones. Percentage of
queries with ads have gone down but monetization has improved - Released landing page quality system
— lost the feed, sorry. damn british telecom! —
Schmidt
- Search is key, core to Google’s success
- Partnerships are growing
Responses To Questions
- Sergey says users are drawn to Google Checkout badges.
- Rosenberg says advertisers are getting better ROI and lowering costs with
Checkout and that it facilitates the buying channel. “Most of them are
beginning to think of Google as a buying channel rather than a marketing
expense” [or the quote was very similar to that]. - Schmidt says 2007 is when mobile search queries will grow substantially,
plus ads are used more in mobile, so revenue per search will be significantly
higher on mobile devices. - Schmidt primary focus with YouTube is growing audience rather than
revenue. Chad Hurley cofounder of YouTube is pushing hard for revenue sharing
with content partners. As for “fingerprinting” content to find infringement,
they are rolling out stuff but still researching much of it. - Kordestani says audio ads are being built out but early to tell full
impact on financials “but we’re making great progress.” Rosenberg says take up
was robust in affiliate takeup, over 700 stations involved. - Didn’t catch person answering — doing a lot to work with international
partners and content partners to improve monetization of ads. - Brin: Interested in health care based on requests from partners and others
coming to Google suggesting work. “It’s not something that we’re looking to
drive the ?P&L? with.” - Rosenberg: UK has been stronger than in the US for growth but see the
seasonal drop in the fourth quarter, relates to UK vacations earlier and the
finance vertical is more robust. - Schmidt: People are pretty much the same around the world but differences
due to underlying financials in different countries. - Schmidt: Doesn’t want to comment on rumors of YouTube content deals before
the purchase. - Kordestani: As Google goes beyond search, focus is on helping advertisers
manage ads in various mediums from one place. - Rosenberg: Real time reports on where ads played big improvement on how
normally it might take 12 weeks to get this. Same as with print in terms of
getting a “kind of dashboard” that “most CMOs” would like. - Schmidt? – Pushing hard on YouTube as a brand.
- Page: Trying to preserve the value of both Google Video and YouTube as
brands. - Schmidt: Could do ads pre-roll, post-roll on YouTube but could do
contextual ads around the video. Experimenting with all this. - Kordestani: Don’t break out growth on percentage of display ads placed
through Google, only that the top 100 advertisers are experimenting - Page: Have a way to go to promote personalization options at Google.
Quality improvements with personalized search are significant and excited
about that. - Question: Want to go into TV ads, and will Google Video and YouTube allow?
Schmidt, we’ve already said we’re experimenting with TV advertising. Looking
to see if they can improve what others are already in. Setup boxes are IP
targetable, so maybe can deliver even more targeted ads.