Google racks up the big numbers

Google, the internet search and advertising giant, is continuing to defy the economic turmoil after booking profits of more than $2.7 billion (£1.7bn) in just three months.

Chief executive Larry Page said it had been a “great quarter” for the US group, adding that its social network, Google Plus, which was launched in June, now boasted more than 40 million users. Facebook, which has been going since 2004, has some 800 million users.

Results for Google’s third quarter revealed a 26 per cent hike in net profits to just over $2.7bn after revenues climbed by one third to $9.7bn.

It is the second time that Page has beaten analysts’ forecasts since he replaced Eric Schimdt as chief executive six months ago.

Google would have made more money without heavy investment in new projects and staff numbers. The company added nearly 2,600 employees in the third quarter and looks set for the biggest expansion of its payroll in its 13-year history.

A darkening economic outlook – particularly in Europe – had stoked worries about advertising growth. But Google’s revenue and “paid-clicks” performance boded well for the fourth quarter, analysts said.

Macquarie Research analyst Ben Schachter noted: “These guys continue to show that they are not immune to the market but that they are going to perform better than traditional players.”

Robust demand from advertisers in emerging markets, such as in Asia, as well as strength in its mobile and display advertising businesses, bolstered Google’s financial results during the third quarter, Schachter added.

“It is beginning to see some softness in WESTERN Europe but it’s being more than made up for by the broader distribution of its products in mobile and the fact that emerging markets are becoming more and more important,” said Schachter.

Page, who assumed the top job in April, told analysts that he was whittling down Google’s sprawling portfolio of projects and diverting resources to businesses with higher-potential returns.

“We have to make tough decisions about what to focus on, or we end up doing things that don’t have the impact that we strive for,” Page said. “Since we last spoke we’ve begun the process of shutting more than 20 different products.”

The company is ploughing money into its fast-growing mobile business that competes with iPhone-maker Apple. Google’s Android mobile software – already the world’s most-used smartphone platform – is gaining momentum. It powers some 190 million devices, up from 135 million in mid-July.

In August, Google announced plans to acquire Motorola Mobility Holdings for $12.5bn. The deal, which the internet group expects to close this year or early 2012, will give it one of the wireless industry’s largest patent libraries, as well as hardware manufacturing operations that will allow Google to develop its own line of smartphones.

But some analysts and investors worry that the company is entering a low-margin business in which it has no experience. A move to build its own phones could also jeopardise support for Google’s Android mobile software from other phone manufacturers such as Samsung and HTC.