Top ranked results for Google as recovery boosts web advertising

Published on Friday 16 October 2009 21:29

INTERNET giant Google called the end of the recession yesterday, reporting a record quarterly profit and saying it is on the lookout for companies to buy.

The world's most used search engine said advertisers had become more willing to pour money into online ads, and consumers had been increasingly turning to online shopping.

California-based Google also promised that some of its earlier moves to diversify were close to reaping rewards.

YouTube – the internet video business it bought for $1.65 billion (1bn) in 2006 – is said to be close to becoming profitable for the first time. One billion videos are watched on the site every week.

The success of YouTube, and a sharp rise in earnings, mean that Google is looking for further areas of diversification through deal-making.

"We're open for business in making strategic acquisitions, both large and small," chief executive Eric Schmidt said yesterday, adding that the group expected to buy small companies at a rate of one a month.

Shares in Google have risen by more than 80 per cent since mid-March, and opened higher on yesterday's better-than-expected profits for the three months to 30 September.

Net revenue rose 8.5 per cent on the same period a year earlier to $4.38bn, beating the $4.24bn expected by analysts. Google's net profit topped $1.64bn, up from $1.29bn a year earlier.

Yesterday's figures represented the group's strongest revenue growth since the end of 2007, a strong sign of improving economic conditions. Earlier this year, revenues fell for the first time in the company's history.

Google was expected to be an early beneficiary of an economic recovery, thanks to its dominance of the online search market, where growth has slowed as recession-hit companies cut advertising budgets.

Schmidt said: "While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future.

"Because of what we have seen, we now have the confidence to be optimistic."

Microsoft has attempted to catch up with Google in the search engine field, launching its own service, Bing, and announcing a tie-up deal with Yahoo, a distant second in the market.

Colin Gillis, an analyst at Brigantine Advisors, said the results only served to underline the imbalance in the market.

"Google has no competition. Yahoo is withering on the vine and Bing is too tiny now."

The bright news from Google came on the same day as computer giant IBM reported a $3.2bn profit for the third quarter, a 14 per cent rise on a year earlier.

IBM's management also added a hint of optimism, saying there were signs of some stabilisation in the overall economic environment.