Google made $1.87B in revenue for the quarter, up 70% from Q3 2005, and up 10% from Q2 '06.

Their free cash flow was a staggering $512M (compared to Yahoo's $288M).

One scary number: Google employed 9,378 employees as of September 30, up from 7,942 as of June 30. That's employee growth of 18% in one quarter! They hired an average of 19 people per work day.

Google continues to spend a ton on capital expenditures, but George Reyes, the CFO, claims that the free cash flow "easily" covers the CAPEX. Google says that CAPEX spending growth will outpace revenue growth for the next few quarters.

The analysts on the conference call seemed more obsessed with video ads, which can't possibly be having ANY significant impact on Google's results, but there were a few questions about CAPEX. Larry Page (!) responded to a question about how much would be needed to support video ads - saying that Google already has plenty of cheap bandwidth.

Another CAPEX question prompted Eric Schmidt to lecture that quote / unquote "over investment" 2 years ago allows them to be over-performing this year. He's talking down to the analysts a bit, annoyed that they don't understand the "invest in infrastructure" model.

How Google is a Monopoly:

The following moments on the call crystalized Google's stature for me:

• Eric intoning about Google achieving "certain scale" and "more advertisers" which allow them to find "new ways to monetize".
• Larry Page saying he's "happy with the quality score" which has improved the ads on the search pages.
• Sergey talking about getting better at "Making [ads] relevant 100% of the time" and "[Showing] all of the right advertisers" for a certain query.

It might be just me, but what's striking about those statements is the satisfaction that Larry, Sergey and Eric are getting from be able to behave as a monopoly provider of traffic on the internet.

Yes. Google is effectively in the early stages of monopoly. They have the scale, they have the infrastructure, and they have the partnerships.

Ostensibly, they control 25% of the advertising on the internet. But pragmatically, they are the player that you must spend 80% of your attention on, if you want to get anything done.

¶ 10/19/2006