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16 April 2010, 14:01

Google increases net profits by 38%

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Google Logo When the large IT companies present their quarterly figures, market observers pay particular attention to two of the big players: Intel as an indicator for the hardware sector, and Google as a portent for the internet economy. While Intel presented figures that marked the best first quarter in the company's history the day before yesterday, Google has shown that it continues to be a smoothly profitable money-making machine – despite all the problems with the Chinese government, with the competition and with data protectionists.

Zoom Google's turnover and profits for the last five quarters (in billions of $).
Google's Chief Financial Officer, Patrick Pichette summarised "Google performed very well in the first quarter", according to an announcement on Thursday. The internet firm achieved net profits of almost $2 billion (£1.27 billion), which is an increase of 38% compared to the same period last year.

Turnover rose by 23% to $6.8 billion. $1.71 billion of the revenue were traffic acquisition costs (TAC) – income Google passes on to its advertising partners. Google's revenue is mainly generated via search result-related advertising. In the first quarter of 2010, $4.4 billion were generated on Google's own web pages, and about $2 billion on partner web pages. Although many companies are saving on advertising in the current economic climate, Google didn't suffer any massive declines in revenue and already started moving forward again at the end of last year.

The revenue Google achieved outside of the United States remained constant at 53%, both compared to the previous quarter and the same quarter last year. The number of paid clicks on links on Google's pages, which, as usual, Google didn't specify in detail, grew by 15% compared to the first quarter of last year.

Despite these favourable figures which surpassed expectations, investors weren't happy: Share prices declined by 3% after market hours. Investors' concerns are that Google could get bogged down by new projects. Google is still in conflict with the Chinese government about the mandatory censorship of search results and German data protectionists have attacked the "Street View" project. In addition, Google is pressed by rivals such as Facebook with its growing user community and by Microsoft with its Bing search engine.

Google has no plans to reduce its investment in new product developments: "We remain committed to heavy investment in innovation", said CFO Pichette. The reported cash funds of $26.5 billion in Google's "war chest" appear to be ample.

During the company's earning conference call, executives also disclosed that, following reports of lacklustre sales, its Nexus One smartphone is "a profitable business" and that 60,000 Android handsets are being sold every day. Google did not, however, confirm when the Nexus One would be available from European mobile carriers, such as Vodafone UK. According to Google, there are now more than 38,000 applications in the Android Market. By comparison, Google confirmed that there were just 16,000 active applications in mid-December of last year.

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