Google rakes in 67 per cent more revenue

Google's fourth-quarter revenue rose 67 per cent and profit nearly tripled on continued strength in its cash-cow paid search business.

Handily beating analysts estimates, net profits for the quarter ended 31 December were $1.03bn, or $3.29 per share, including one-time items such as stock-based compensation, compared with $372m, or $1.22 per share, during the same quarter in 2005. Excluding those items, profits were $997m, or $3.18 per share.

Total revenue for the quarter rose 67 per cent to $3.2bn, compared to $1.92bn a year ago. Excluding traffic acquisition costs, or commission paid to content partners, revenue was $2.23bn.

Analysts polled by Thomson Financial were expecting Google to post profits per share of $2.92 excluding items, and revenue of $2.19bn, excluding traffic acquisition costs.

Paid search represents nearly all of Google's revenue. The company is expanding its advertising platform beyond the web into radio and print.

Founder Sergey Brin said in a conference call with analysts: "We paid over $3bn in 2006 to our partners and this is a figure that we expect is going to increase as we ramp up our video, radio and print programmes."

Asked about whether the company plans to help companies advertise on television, chief executive Eric Schmidt said: "We have already said that we are experimenting with traditional television advertising... There are many reasons to believe that the targeting technology we have invented can apply well, that advertisers will pay much higher rates for ads that are targeted."

As for YouTube, Google suspects content creators will take advantage of the direct link to fans the video-sharing site provides, said Schmidt. "We can connect the copyright owner with the user," he said. "We're pushing for a model where the people who produce the content get some revenue back." In addition, Google is working on audio and video fingerprinting technologies to protect copyright holders, he said.

When it comes to search, paid clicks on ads on Google's network and its publisher partners' websites grew more than 60 per cent in the aggregate, according to chief financial officer George Reyes.

While things look rosy for Google, its largest search rival posted more modest fourth quarter results. Last week, Yahoo!'s profits were down more than 60 per cent from a year ago.

Web traffic to Google grew 24 per cent in the fourth quarter from the same period a year earlier and Google accounts for more than half of all web searches, according to Nielsen/NetRatings. The company is expected to capture two-thirds of the search advertising revenue this year, according to eMarketer.

Google shares, which closed at $501.50, dropped as much as two per cent in after-hours trading after the company failed to make so-called "whisper numbers" on the street that were slightly higher than the estimates that they beat. The stock has risen nearly 18 per cent over the past year, about the same amount that Yahoo!'s has fallen.

Elinor Mills writes for CNET News.com