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Google Q2 Results Not Good Enough?

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Google's second-quarter earnings figures were good, with a 24% year-over-year increase, and yet still not good enough as they came below market expectations. This is why the forecasts we gave you earlier this week were mixed.

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Core Figures
Revenues in the second quarter rose 24% to $6.82 billion from $5.52 billion during the same period a year ago. Revenues from Google-owned sites came in at $4.50 billion, up 23% from last year's $3.65 billion and accounted for 66% of total revenues. Revenues from its partner sites through AdSense, reached $2.06 billion, up 23% from $1.68 billion in the second quarter of 2009, accounting for 30% of total revenues. Adjusted net operating income stood at $2.67 billion, or 39% of revenues, compared to $2.17 billion, or also 39% of revenues, in the second quarter of 2009. Adjusted net income was $2.08 billion, compared to $1.71 billion in the second quarter of 2009.


Still Below The Mark
Dizzying figures, really. So why would the market (read: stock market) be disappointed? Because Google's Q2 performance translated into adjusted earnings per share of $6.45 dollars, just short of analysts expectations of $6.52. This was enough to send Google shares down.


Search Marketing
Aggregate paid clicks rose 15% year on year and 3% quarter on quarter. Aggregate paid clicks include clicks related to ads served on Google sites and the sites of its AdSense partners. Average CPC (including clicks related to ads served on Google sites and AdSense partners sites) was up 4% from a year ago and up 2% from the previous quarter. Traffic Acquisition Costs increased to $1.73 billion from $1.45 billion in Q2 2009. It accounted for 26% of advertising revenues, slightly below last year's 27%. TAC is primarily related to amounts paid to AdSense partners totalling $1.46 billion in the period, with the rest (payments to distribution partners and others) amounting to $269 million.


International Market-Driven
Revenues generated from outside the U.S. are the company's biggest stream, accounting for 52% of total sales. The UK alone represents 11% of total revenues in the quarter at $770 million, compared to 13% in the second quarter of 2009.


What's In Store?
Commenting on the results, CEO Eric Schmidt said: "We saw strength in every major product area, as more and more traditional brand advertisers embraced search advertising and as large advertisers increasingly ran integrated campaigns across search, display, and mobile. We feel confident about our future, and plan to continue to invest aggressively in our core areas of strategic focus."

If you look at the very end of the company's statement, you'll see that the Mountain View-based company is set to raise another $3 billion through the issuance of commercial paper. At the same time, the search behemoth says it has "established a $3 billion revolving credit facility," but it is not clear whether this is an or/and situation. Officially, it said "Net proceeds from the commercial paper program will be used for general corporate purposes." Like what? Investments, as Schmidt said? Google's latest and unconfirmed - as yet - investment is believed to be for Zynga, in the $100-200 million bracket. And we also know now that it is looking into boosting its social posture too, although, once again, the reports have not been commented upon by the company but 'confirmed' by third-party figures. If the rise in the number of full-time employees from 20,621 at end-March to 21,805 at end-June were to be an indicator, it would be easy to say Google is bracing for another big launch. But that would be sheer speculation... or would it?



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