Google Reports Increased Profits

typobox43 writes "According to Yahoo! News, Google has reported increased profits compared to the year-ago numbers in its first quarterly earnings report as a publicly held company. Google's revenue figures more than doubled, leaping to $805.9 million from $393.9 million. Google shares closed today at $149.38."

Comments

Good

[metlin]

Atleast, they deserve it.

But I just hope that after all this, Google does not turn into yet-another-evil-corporation. A lot of companies started out with benign ideals, only to be corrupted as they grew bigger and were taken over by selfish MBA types.

I just hope that that the Google share-holders realize that what makes Google important are not just its ideas, but also the nature of their ideas.

Kudos, Google! You guys deserve it.

Re:Good

[WIAKywbfatw]

99 percent of shareholders invest in a company for one reason and one reason only: to make money. They don't care about ethics, doing business in a friendly manner or the warm fuzzy glow inside that employees take home with them at the end of the day, they're only interested in the almighty dollar.

And, with the way that public companies have to operate by law in the US, that means doing whatever it takes: the boards of US companies are legally obliged to increase shareholder value as much as possible, and if that means no more Mr. Nice Guy, well, that's just tough for you, for me, and for anyone else that gets in the way of the bottom line.

Want to know the one way to keep a company from running into these sort of hassles? Stay privately owned rather than become a publicly traded company.

Of course, that means you can't properly compensate all the people (and venture capitalists, if any) that got you to where you are, and that presents its own set of problems including staff retention, but that's another story.

Bottom line: don't expect Google to be your best friend from mow till the day that you die.

Re:Good

[hunterx11]

I would argue that Google's credo has helped them to make money far more than it has hindered them. Not pissing off your customers and planning on succeeding in the long run might be a radical idea in today's business world, but it hardly constitutes a breach of fiduciary duty.

Re:Good

[DigitumDei]

Correct me if I'm wrong, but as I understand it the only way Google makes money is via paid ads. And the best way for them to sell those paid ads is by having tons of free applications that people WANT to use.

I think, in the industry they're in (that is search and anything they can link search to), that it really is in their best interests to NOT become yet another corporation. If they did, MS would eat them alive in no time.

Re:Good

[metlin]

I know exactly what you mean.

I'm the co-founder of a small technology startup, and it is for this very reason that we do not want to look out for VC investment.

But the unfortunate problem is that VC investment is quite inevitable, especially if you want to grow. And once VC investments come in, they would most certainly insist on an IPO, because that increases their profit margins, too.

That's a vicious circle - it's very hard for an entirely privately held company to make it big. The biggest thing that VC investments bring in is not just the money - it is the contacts and the pedigree. If you are a company in whom Vulcan or ING Barings have invested, then you must be good.

That brings in more business, and you grow. So yeah, I can pretty much relate to what you're saying!

Re:Good

[WIAKywbfatw]

The reason why Google has succeeded has more to do with the fact that it has an excellent product rather than the fact that it is a friendly company.

There are plenty of companies out there that have similar philosophies and that fail, you just don't hear about them because they didn't have a product good enough to stop them from failing.

Re:Good

[shrykk]

Yes, but part of the excellence of their product is that their ads don't piss us off. They realised you will put up with a few ads in order to get an excellent product and the day they sell out peoples private data or start bombarding us with pop-ups is the day we'll walk away.

Re:Good

[CaptainZapp]

Correct me if I'm wrong, but as I understand it the only way Google makes money is via paid ads.

OK, I correct you :)

They generate revenue by selling business solutions and 3rd party access to their search.

But you're not far off in the sense that 90% of their revenues are generated by ads.

finance.slashdot.org

[Anonymous Coward]

Tune in tomorrow for the earnings reports from railroad and textile companies, and we'll discuss whether Amazon P/E ratio makes sense to hedge funds managers.

Thank you for being with Slashdot Finance. Buy LNUX!

Re:finance.slashdot.org

[metlin]

Actually that is not necessarily a _bad_ idea.

There are a lot of stories here on Slashdot that would qualify - this one, for instance. And I'm sure there are quite a lot of geeks out there with enough and more knowledge of finance.

Hey, if we can have IANAL, why not IANAE (economist) and the like.

Personally, I think finance.slashdot.org would be a good idea.

Re:finance.slashdot.org

[leereyno]

At the very least we'd be sure to hear some great war stories about .com's that went .bomb.

www.petfood.com... Why buy your cat food at the grocery store for $6 a bag when you can buy it online for $3 a bag and only pay $6 to have it shipped to you.

www.linuxone.com: Proof that imitation is the sincerest form of flattery. Would you believe I actually have a beta of their distro that never saw the light of day! I'm going to have to dig that up sometime...put it on my website.

Lee

Re:finance.slashdot.org

[metlin]

On the contrary.

The DotCom boom was necessary for the Internet to be made popular and the new technology economy to settle in.

There was simply no other way - it was just a means of the new economy setting in, and the dust is beginning to settle now. It could not have happened any other way - this is the only way large scale adoption would have been made possible.

And so, contrary to any and all assumptions, it has done a lot of good than bad. Today, despite anything, the US is numero uno in IT. If stupid politicians don't hurt it, it would stay that way too. Countries like India and China merely provide the equivalent of labour - very small amount of true innovation comes out. The real innovation happens at places like MSR or IBM or PARC.

So yeah, the DotCom has indeed done a great deal of good, too!

That's how IPOs goes

[Dancin_Santa]

Say you have a bank account. You are suddenly inundated with tons of cash (almost 2 billion dollars worth!) because you pimped yourself out. Then you stick all that cash in the bank account.

Even at a very low interest rate you can get a significant return on that money.

Obviously, you'd like to do stuff with it like buy jet planes for your managers and little stickers and baseball caps for your engineers, so your total return will be less than expected. But in the end, your huge pile of cash garners you a very nice gain just at basic interest rates. Couple that with some savvy investing (no-load mutual funds!) and you can have yourself quite a bit more "revenue" than before you sold yourself out.

Re:That's how IPOs goes

[bsdfish]

Ok, lets crunch some numbers:

2 billion * 1/4 (one quarter) * 5% (much more than you can get through safe investments) = $25 million. And how much did Google's revenues increase by? $400 million?

Re:That's how IPOs goes

[hkmwbz]

In what way doesn't Google have "salable products"?

We are Google's product. We, the users of their free and popular services. And there are a lot of us out there. To me, Google Groups alone is invaluable in finding information. I use it several times a day.

And not only that, but people don't seem to be very concerned about blocking Google ads. They block banner as and popup ads, and all those nasty things, but Google's nice and unintrusive text ads are often let through.

I think you are underestimating Google's product line. You are one of its products, and Google is making money because millions of people like you and I use them, often every day. And as long as Google continues to be useful and offer something we want, we'll use it, and we'll spread the word, and more and more people will use it.

Re:That's how IPOs goes

[dasunt]

2 billion * 1/4 (one quarter) * 5% (much more than you can get through safe investments) = $25 million.

IANAA[0] but, the Vanguard 500 Index Fund has averaged about 12% annually[1]. Some market indices have been remarkably stable in the long term, and the overhead for a mutual fund tracking an indice is rather low, due to the simplicity of the fund. However, while such a habit of investing has been relatively safe in the long term (say, 20 years down the road), in the short term the returns are relatively unpredictable.

The problem with "safe" investments is that, in the event of massive inflation, the actual return isn't so "safe". Imagine what the inflation of the '70s did to "profits" from bonds.

[0] I am not an accountant (and thus this is not investment advice)
[1] Past performance, of course, is no guarentee of future performance.

Re:Google Moogle

[metlin]

Well, I don't think it's entirely ads (emphasis mine)-

Google and rival Yahoo each get a significant portion of their revenue from Web search advertisements, a lucrative and fast-growing market.

That must mean that they have alternate sources. For instance, Google does sell search-boxes and the like. I'm sure there are other sources of income, too.

Glad to see it

[Bill_Royle]

Despite the guaranteed criticism any company that "makes it" gets, I think Google's a good example of good ideas paying off.

Do I worry that they'll become another Microsoft or Oracle? Sure - but the best way to prevent that is to support the good that they do, while expressing directly to their feedback lines the things you don't like.

Thus far, they seem to be listening. I hope they keep up the good work!

Sorry, I have to...

[Anonymous Coward]

Step 1: Free search engine
Step 2:
Step 3: Profit!

Hell, it worked!

Re:Google Moogle

[Anonymous Coward]

Google has search results ads and website ads on third party sites. They're also marketing search related software products (not just the free gimmicks for the masses).

Re:Google Moogle

[Anonymous Coward]

I thought online advertising was dead... Who actually bothers to click those ads? And if they do they are usually tricked and don't buy anything anyway.

My brain is trained to recognise and ignore adds of all sorts. Even the big fullscreen ads you see on gaming sites I instinctivly know to look for the "continue to article" link.

Re:Google Moogle

[wargolem]

Not at all. Although advertising is still a major source of revenue, Google makes plenty of business offering enterprise solutions. For example, Amazon's new search engine is Google powered (previously reported here). I believe Yahoo's search engine has been powered by Google for a while now too, although I could stand to be corrected.

Re:Copernicus Center

[aardvarko]

You're aware that Yahoo News is merely running a Reuters story, right?

Re:Google Moogle

[mirko]

Google has region-based advertising :if I am looking for Korg from Switzerland, I'll get links to the music shops around me.
(This is the difference with many sites, incl. Slashdot who propose me some US-centric ads which I do not even care to read anyway because I am just so untargetted that it almost sounds unwelcoming.)
Anyway, it doesn't work that bad though I have one issue : people who buy advertising for their oiwn "search engines". At the end, you get their add for unrelated products and this is just polluting.

And since they're a business...

[physicsphairy]

I wonder what they're going to do with the extra money?

As far as the search engine wars go, well, I think they've pretty much been declared the winner for now. It will take something very innovative and different from existing engines to have a chance at dislodging them.

So maybe that's where you see things like Gmail and Google Desktop Search coming from? Theres not a lot of room to expand in the search engine arena; not a lot they can do other than branch out into places where there's more room to innovate and expand.

Re:And since they're a business...

[magarity]

I wonder what they're going to do with the extra money?

What "extra money'? When a stock price goes up, the company doesn't get a penny. A company could issue yet more stock at near the newly high price, but that isn't what's happening here.

As far as the search engine wars go, well, I think they've pretty much been declared the winner for now

Please see: AltaVista, Yahoo!, Netscape, and InkTomi all of whom were declared "the winner for now" back in their respective days. Of these, only Yahoo! has transitioned into a major portal. Google is buying up a lot of miscellaney technologies so might be transitioning into an all purpose portal as well.

Re:Me too stupid to understand the stockmarket

[hunterx11]

Stock broker: Okay, now before I execute this order, are you sure you understand the risks of stock ownership?

Homer: Absolutely!

Zoom into Homer's brain, with a bunch of people in a dance line singing "We're in the money." Curtains open, revealing a roaring King Kong.

Homer: You heard the monkey, make the trade!

Damn! I knew I should have bought some GOOG...

[fugas]

To be totally accurate, GOOG soared even higher, to 161.79, in After-Hours trading. That's a nice 14.67% increase over the previous close.

Don't take this as a troll, but..

[mumblestheclown]

• Closed source
• Multi-Billion dollar corporation
• Single point of information control
• Monopolistic Practices
• Secretive

Explain to me again why we should be cheering for them? Yes, it's a useful service. But MS stuff is likewise useful (despite what many of you think). So what if it's free for you to use? They still have a business model.

The best thing I can say about google is that it is unsustainable. Consider if the company is worth X billion dollars now. Well, even the most armchair businessman here will tell you that it wouldn't take a billion dollars to build a duplicate google system. It wouldn't even take a twentieth of that. And, while google is nice and popular now, if a better search engine came along with slightly fewer ads or whatever else perceived benefit, it would seriously erode google's traffic and cause actualy *gasp* competition and choice for advertisers.

and no, Yahoo and its overture systems are not an alternative.. they are a different service that targets different markets.

What I am suggesting is that google is selling a very generic, easily duplicatable service if somebody just got the funding to hire the right engineers. Google knows this.. that's why they are trying very hard to build all sorts of peripheral stuff like gmail and so forth, but the fundamental (99%+) business is still the search engine.

Re:Don't take this as a troll, but..

[mpoulton]

it wouldn't take a billion dollars to build a duplicate google system. It wouldn't even take a twentieth of that.

Really? They have a LOT of hardware. Lots of it. It's specialized, too, not all off-the-shelf stuff. More importantly, though, they have intagible assetts worth much more than their equipment -- code. Googlecode is about as non-trivial as it gets. To write it all, they have some of the smartest engineers in the world, and those engineers aren't cheap. Just as important as their technology itself, they have a massive user base that no other search engine can match without years of media exposure and word-of-mouth. They have an established reputation for fairness and avoidance of underhanded manipulation of results. I believe those factors make it impossible to compete with Google in the short term, even if their hardware and code could be replicated for a few hundred million dollars (a more likely figure than $50M).

Investors like short-term results. Try telling your VC's that they should invest $150M in a search engine project that replicates something already in existance, and won't be a moneymaker for at least 5 years. Think they'll bite?

Re:Don't take this as a troll, but..

[Anonymous Coward]

You're right. Eurotunnel was never built. So silly of me. Also: private equity doesn't exist. It's hallucination shared by me and a few million of my closest friends. Oh yes, and also large companies who have the resources on hand never invest their own money in large engineering projects, because as we all know, no satellites have ever been launched.

I would mention my credentials in money raising to you (but I have sat on both sides of the table), but, I mean, what's the point? This is slashdot. You learned a little about VC funding during the dot com days and now everything looks like a nail to you, as it were.

Investors are highly unlikely to give that sort of money to an unproven bunch of slick speaking types with a foosball table in their office but not much else, but there are certainly very real situations where such things can be funded, despite your thumbnail of knowledge.

Re:Don't take this as a troll, but..

[TinyManCan]

As someone involved in large Enterprise Scale operations, I can say that Google has certainly done something that is not easily duplicated. They managed to get an application running on 10,000 servers that could easily handle a load and dataset that is massive.

Google's strength is not in their search engine, or in gmail, but their ability to execute new appications in a highly available and supportable manner. Google has developed an Operating System for the web so to speak that is head and shoulders above any other system out there currently.

If Google continues to keep delivering solid and functional applications that meet my, and other users needs, we may see a future where the only OS you need on your local computer is a web browser.

That is why this stock is going through the roof. This company has capital, resources and manpower to deliver a Microsoft Killing blow, and is aquiring the skillset and experience needed to pull it off each day they run 'the worlds biggest application.'

Re:Ad revenue?

[identity0]

No, they also sell search services like a "search appliance" and custom website searching services. See here for details.

I believe they've also licensed their software to some companies who want to build more specialized search tools as well.

"Phase 2"

[Vollernurd]

Google's recent run of new products and financial results is starting to remind me of that old Onion story about how "Starbucks Starting on Mysterious 'Phase 2'". All their outlets were closed and boarded-up and Starbucks management were readying their mind-control devices.

Now Google is getting ready for its own "Phase 2" having made me sign up for Gmail, that desktop search thing, etc.

Time to put my tinfoil hat back on.

Yahoogle

[zobier]

Has anyone else noticed the similarities between this and this? Hell, it even has the 'did you mean' and calculator features!

Re:Yahoogle

[Anonymous Coward]

Holy crap!

Hey, if Windows can sue Lindows just cause it is spelled similarly, cant Google make them stop doing that?

I mean that is almost identical except for the logo change.

Re:Google Moogle

[marcuspl]

People tend to be very narrow minded when it comes to making money. Google has one of the absolute largest and probably best organized set of meta data of the internet today. The internet is probably the largest collection of semi-organized information around. They also have a kick ass search engine to help you receive just the particular snippet of information you want.

This has an great value for me as an individual. For a company? Huge!

I bet you could make a fortune just explaining why google can make as much money they want. I bet google could make a fortune just selling the information of how they got to where they are today. As a company as well as the technical side of it. Which happended to be published pretty much as a tutorial some time ago if recall my readings correctly.

So, no, I don't think ads are their only source of income. If they really upped their money making intensions, which they probably will sooner or later, they could make the ads a disapearing part of their total income. Selling information, information analysis, customized search engines, white papers, meta data processors and information systems in general are just some ways for them to make the big bucks.

How about about Boogle - your on demand complete Bank Software System Suite? I would probably trust google over any other company when it comes to Information Systems.

Re:Not so rosey

[kahei]

If your father's on the board, that narrows down your identity pretty well -- I don't think posting AC will help much!

Which leads me to suspect that either

a) Your father is not on the board because you are Supertroll (trolls at a rate of 3 billy goats per minute!) or

b) Your father is going to have harsh words with you if he ever reads slashdot :)

I agree with what you said, though. It's cute the way geeks randomly divide companies into 'good' and 'evil' while the companies just go on trying to make a profit -- kind of like primitive man personifying the thunder and rain.

Re:Google Moogle

[badrad]

Actually, a couple months back Yahoo switch away from Google to an internal search engine.

Re:Dot-com boom in a single corporation

[spagetti_code]

I've got to agree, this smells of dot-com euphoria. The company has a market cap of 40bn on 52mn of net profit. Despite all the good things google is doing, their core revenue comes from web ads which is a fickle business. They've done a hellofa job, providing a better product (web ad delivery) than anyone else has before, but it sure is a risky lifestyle. I'd really be interested in overall click-through rates.

I haven't seen anything that will create a more solid/reliable/long term revenue stream yet. I'd bet that the day they start charging for gmail or desktop search, their loyal customer base would desert them.

Perhaps we could open the floor to slashdotters - where do you think google could up their revenue stream without annoying us loyal customers?

Oblig John Burr William quote

[bojanb]

"A business is only worth the profit it will generate from now until doomsday, discounted back to the present, adjusted for inflation."

So there.

Re:Not so rosey

[madaxe42]

Son??? What have I told you about disclosing our uber sekrit evil world domination plans? I for one, welcome our... selves. Now go to bed. No milk and cookies for 20 minutes for you! Shame!

Where's the evil?

[JaredOfEuropa]

Closed source

So? I can see why they wouldn't want to be too free with their search engine technology. For once, someone might easily duplicate it, but more importantly, people might exploit inside knowledge of the system to bump their own webpages up in the ranking. Pageranking has to rely on certain 'tricks' rather than a fully objective and fair mechanism, and in this case, obscurity is way to go.

Multi-Billion dollar corporation

I don't see this as a reason to stop cheering for them. Nothing wrong with financial success.

Monopolistic Practices

The question is: do they simply have a monopoly on certain things, or do they use their monopoly to illegaly control prices or keep out competitors? For one, I don't really see where the monopoly is... advertising? I wasn't aware that advertisers have to go through Google these days...

Secretive

See my first point.

Google has a good and eminently useful core product which they provide for free. They make money off ads like so many free web services, but they choose to do so in a rather low-key manner. In addition they are starting to offer other free services, not by copying the competition, but by listening to the customers and raising the standard for everying else. Compare GMail to other free email services, and you'll see what I mean.

I guess many people are cheering for Google because this appears to be a company with good ideas, but also with good ethics, a drive to do things right, and attention for their customers; qualities that other companies often see as cost centers and something that they have to pay lip service to, to further their public image. With Google it seems that these very qualities are the things that made them succesful. It's nice to look at a company that works because of these good practices rather than despite them, because it reinforces our belief that the world works as it should, and that the good guys can finish first. (Yes yes, it sounds melodramatic, but I don't really have any other way to put all this).

Re:Google Moogle

[hachete]

Yahoo bought overture (which I think used to be AllTheWeb)

http://searchenginewatch.com/searchday/article.php /2234821

Re:Why Google did their IPO...

[gomiam]

Actually, that wasn't the reason for the IPO (according to a Newsweek report I read some time ago).

The reason was they would have to present their accounting books to the Administration, since they have gone over some profit limit (or something like that). The funny thing is, if they really wanted to keep the company out of Wall Street's hands, they could have just incorporated it (I think that's the term for a private society-owned company -the Spanish term is sociedad limitada-) and they would probably get the best of both worlds: a known company with known stock value, yet not publicly sold and bought.

Excuse me if my writing isn't too good, but my knowledge of economic English terms is quite scarce.

My Ad Was...

[darkmeridian]

..A google ad saying "Can you boost the profitability of your business?"

I don't know, google, can I?

Re:IPO Price Not Crazy After All

[jtwJGuevara]

No, the IPO wasn't too crazy, but the newly projected stock price is well beyond crazy. I was viewing CNBC this morning and heard that one investment firm (I forget which) upgraded google's stock to perform in the $200 dollar range. That would give google a P/E of about 100. Such a price to earnings ratio is way too much, regardless of how well the organization is performing. Such speculation is the reason we had the late 90's bubble and the '29 crash.

Still overpriced

[Fished]

Disclaimer: I own some GOOG, and I've done pretty well with it.

But I wouldn't buy any more at current prices. Even with a 100% increase in profits (which is what they've done) they're trading at a P/E of 180. My general rule is that the earnings growth needs to be less than or equal to the P/E - which means I'd buy GOOG at a P/E of 100, or maybe even 120. (The odds change a bit when earnings growth is truly phenomenal.) But 180 is overpriced by 30-40% at least. Worse, I think that we have to expect their earnings growth to slow down a little in the next few years.

You can't make money in the long run by overpaying, no matter how good the company is.

Several ways to look at this

[bigberk]

Given the way the stock price has increased, I think many of us were correct when we identified the blatant poo-pooing of google's IPO as a deliberate strategy by the organized "analysts". It seemed out of place at the time.

• Rule #1: Analysts are full of shit. They always have been, they always will be. You should have gotten suspicious when you kept hearing 'headlines' about experts warnings against GOOG. Do not ever act based on analyst opinions you see on finance.yahoo; recommendations on CNN, CNBC. Take these opinions with a scoop of salt.
• Rule #2: The periodic earnings report mean next to nothing. You think I'm joking? Ask any real accountant. Periodic financial statements are not audited, nor do they reflect an entire operating cycle. Expenses might be deferred to later on. The real story is to be seen when a year or two has passed. After such a period, you will have seen two audited reports and the period is sufficiently long that revenues and expenses can't be shuffled to look favourable. In other words, if something bad is happening it can't be hidden forever.

Those are my recommendations, as an accounting student and someone who has done decently with market investments.

gBay?

[GeorgeH]

Did anyone else notice that both Google and eBay posted $805.9 million in revenues in Q3? (spotted at Signal vs. Noise)