In fact, the earnings call WAS pretty boring, with the Google team practicing serious message discipline, everyone emphasizing that they really DO CARE about search and especially advertisers.

Gross revenue increased 63% over Q1 of last year to $3.7 billion. Revenue from Google properties was $2.3 billion, representing strong year-over-year growth of 76%. We experienced healthy traffic growth in our Google.com business both domestically and internationally.

Now turning to cash flow, operating cash flow was strong at just over $1.2 billion. Free cash flow, a non-GAAP measure which we define as cash flow from operations less CapEx, increased to $623 million.

In the tradition of Arsenio Hall, here are some thoughts - things that make you go "Hmmmm".

• Quality Score is working. It means Google is showing fewer ads per page that are "worth more".
• They said paid clicks on Google and its partners' sites rose 52% from a year ago. Wow.
• Google spent $597 million dollars in capital expenditures- mostly on servers and data centers. I think the technical term for that is: "shitload". Seriously, it probably equates to something like 250,000 servers.
• Fast growth in UK is coming from attention to big "named" accounts and a successful sales team. Interestingly, the Google team thinks that rapid UK online ad spending growth may stem partly from the more limited TV advertising landscape in the UK (i.e. the BBC doesn't soak up as much ad spend as the US networks)
• Toolbar users search more - a lot more. Google has been very successful in toolbar distribution
• Google has deals to show ads on 15 of the top 20 social networks in the world.

Overall, three things really strike me: 1) Google is making a lot of these gains with big advertisers. 2) Unlike Terry Semel, who says that Yahoo is "well-positioned to take advantage of future internet growth", Google is actually taking advantage of current internet growth in a massive way. 3) Google looks insanely strong internationally. By comparison, Yahoo's over-hyped Panama ad system is NOT live in any countries besides the US and Canada.

Even though every analyst currently has "buy" ratings on Google, which doesn't leave a lot of room for upside surprises, Google's financial performance and increasing dominance should be able to power the stock through the $500 - $600 level.

Labels: 2007, earnings, google, q1, yahoo

¶ 4/19/2007