Google Profit Surges on Strong Search Advertising

Google’s profits more than doubled in the second quarter, as the company continued to increase its share of the lucrative search advertising market.
The company, which announced results yesterday, exceeded analysts’ expectations for both sales and profit. That is in contrast to Yahoo, which disappointed Wall Street Tuesday with lower-than-expected revenue from search-related advertising. Yahoo met profit expectations because it postponed some hiring and advertising spending.
In after-hours trading, shares of Google rose nearly 1 percent, to $390.55. The stock has fallen this week in sympathy with Yahoo, which dropped 22 percent on Wednesday. Shares of Yahoo rose 0.3 percent yesterday, to $25.27.
Google, based in Mountain View, Calif., attributed its success to several areas in which Yahoo fell short. The company said it continued to develop technology that increases the advertising revenue it earns from each search, while Yahoo said its already delayed effort to build such technology would be another three months late.
Google also continued to expand the number of sites that display advertising it sells, while Yahoo is still absorbing the loss of its largest advertising client, MSN from Microsoft, which is selling its own advertising.
“We did really, really well in a quarter that is seasonally slow,” said Eric Schmidt, Google’s chief executive, in an interview. “Big companies as they get larger seem to slow down. We continue to innovate.”
Google earned $721.1 million, or $2.33 a share in the quarter, compared with $342.8 million, or $1.19 a share, in the period a year ago. Excluding charges related to stock-based compensation and a gain from the sale of its shares in Baidu, the Chinese Internet company, Google earned $2.49 a share. Analysts had expected the company to earn $2.22 on that basis.
Google’s revenue was $2.46 billion, up 77 percent.
Excluding the payments it makes to companies like AOL that carry its search advertising, Google’s revenue was $1.67 billion, up 88 percent. That is a bit higher than the $1.65 billion that analysts expected.
In a conference call with investors, Mr. Schmidt said that one top company priority was to expand its advertising business. One aspect of this is to build services for graphical and video advertisements of interest to brand marketers, the strongest area of Yahoo’s business.

The company said its business was especially strong in Europe but that it lagged in most of Asia.