All eyes were on Google yesterday afternoon when the search engine giant reported its earnings for the second quarter. Because of its position, Google has served as a sort of proxy for gauging the global recession's effects on the internet economy.
Based on Google's results, there's good news and bad news. The good news: things could be far worse. The bad news: things could be far better.
Net revenue, which takes into account traffic acquisition costs, was $4.07bn in Q2, up 3% year-over-year. Net income was $1.48bn, up from $1.25bn in the same period last year. These results slightly beat analyst expectations.
66% of Google's total revenues came from its own sites and 31% came from its content network which includes AdSense. As in the previous quarter, international revenue accounted for more than half of Google's total revenue. The percentage of revenue from the UK saw a slight dip from 14% to 13% year-over-year.
Google CEO Eric Schmidt was satisfied with the results:
Google had a very good quarter, especially given the continued macro-economic downturn. While most of the world’s largest economies shrank, Google’s year-over-year revenues were up 3%. These results highlight the enduring strength of our business model and our responsible efforts to manage expenses in a way that puts us in a good position for the economic upturn, when it occurs. We remain focused on investing in technical innovation to drive growth in our core and new businesses.
All told, Google delivered a solid quarter. But it was far from spectacular and cynics might argue that analyst expectations had been tempered, making it easier for Google to beat them. The question investors must now mull is where Google's future growth will come from. Obviously, the global economic environment is partly responsible for Google's slower growth but just how much growth Google can achieve when the economy rebounds is the real question.
In its earnings conference call, Schmidt talked a bit about display and stated that YouTube was "now on a trajectory that we’re very pleased with". Since Google doesn't break out YouTube's revenues and costs separately, it's hard to guess what YouTube's near-term potential is as it relates to Google's bottom line growth.
One thing is for sure: for now, Google is handling its affairs well in a tough environment and with nearly $20bn in the bank, the company still has the ability to make moves if it so chooses.
Photo credit: dannysullivan via Flickr.