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Google Results Good, But Not Good Enough?

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Google reported its second-quarter results yesterday, which showed rapid revenue growth and strength in its business. Unfortunately for Google, expenses rose more than analysts expected, and profits fell short of expectations.

The news sent investors scurrying in after-hours trading, according to the New York Times

"The company spent too much, as they said they might some day," Jordan Rohan, an analyst with RBC Capital Markets, told the Times. "It wasn't a bad quarter. It was a quarter where the analysts' models need to be reset at a slightly lower level of profitability, and that hadn't happened in a while."

Google attributed much of its overspending in the quarter to operating expenses, including payroll expenses for 1548 new hires and a revamping of its bonus plan.

"We ended up somewhat higher on our headcount expenses than we planned," CEO Eric Schmidt said on the investor call. "We will watch it, we will adjust, we will be opportunistic but we are going to be careful about that."

Google reported revenues of $3.87 billion for the quarter ended June 30, 2007, an increase of 58% compared to the second quarter of 2006 and an increase of 6% compared to the first quarter of 2007.

In the second quarter of 2007 ending June 30, Google-owned sites generated $2.49 billion, 74 percent higher than the $1.43 billion gathered the same quarter of '06. Its AdSense network sites garnered $1.35 billion in Q2, a 36 percent leap over second quarter 2006.

Paid clicks revenues saw a boost, too, rising about 47 percent since the same period last year. Paid clicks represent the aggregate number of clicks related to ads served on Google sites and AdSense partner sites.


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