Street Sees Google as Undisputed Search Leader

Web Giant's Revenue Accounts for 24% of Total Online Income

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NEW YORK (AdAge.com) -- For the seventh time in eight quarters, Google beat the expectations of Wall Street, reporting today that it more than doubled second-quarter profit in comparison to last year. Google's strong earnings look all the more impressive in contrast to those of its main search competitors, Yahoo and Microsoft.
Google's chief is 'very, very happy' with the search giant's second-quarter results.
Google's chief is 'very, very happy' with the search giant's second-quarter results.

Rival's woes
Earlier today, Microsoft reported a 23.5% drop in its fiscal fourth-quarter earnings, while Yahoo yesterday said its second-quarter profit fell nearly 80%, to $164 million. What drove Yahoo's stock to a 52-week low, however, was the company's announcement that its new ad platform, code-named Panama, won't be released until the fourth quarter.

"We're very, very happy with having such a strong quarter in a seasonally weak period for us," Google CEO Eric Schmidt told investors on a conference call. The now undisputed leader in search reported quarterly net income of $721 million after the market closed -- up from $342.8 million during the same period last year.

'That's impressive'
Revenue rose 77% to $2.46 billion, while Wall Street was looking for about $2.40 billion in revenue for the quarter. "The revenue that Google is generating now makes up over 24% of total online income," said David Hallerman, an eMarketer Senior Analyst. "That's impressive."

Earlier this month Merrill Lynch cited Google's ever-growing search dominance along with currency benefits as reasons for the company's continued success. Google recently launched a simplified checkout option for shoppers buying products from participating stores online. Synched with Google's AdWords search-advertising program, some analysts -- including those at Merrill -- saw the move as part of a larger effort by Google to boost search-advertising revenues.

"We believe Google will maintain its advantages in search innovation and ability to sign affiliates," Merrill Lynch analyst Justin Post wrote in the report.

Continued market share gains
Furthermore, Merrill said it expects Google to continue to gain search share through next year, thanks in part to toolbar-distribution deals with computer maker Dell and desktop-publishing-software company Adobe Systems.

Late last month, Google began testing a cost-per-click ad alternative that only charges advertisers after their ads generate sales or qualified sales leads -- a move analysts see as catering to the lucrative affiliate-marketing space.
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