Beat ?: NO ! (reported $3.92/share vs. analysts' consensus of $4.03/share...up from 2Q07's $2.93 a share which represents year over year EPS growth of 34%)
Profits --> Up 35% to $1.25 Billion (from $925 million)
Sales --> Up 39% to $5.37 Billion (from $3.87 Billion)
Other Highlights + Guidance:
*Google-owned sites generated ad revenues of $3.53 billion for the qtr (66% of total company revenue)...a 42% increase over 2Q07 revenues of $2.49 billion.
*Google's partner sites (Adsense Network) generated ad revenues of $1.66 billion for the qtr (31% of total revenues)...a 22% increase over 2Q07 revenues of $1.35 billion.
*International Sales accounted for 52% of total revenues or $2.80 Billion (compared to 48% last year)
*Keeping currency rates constant year over year, international sales would have been lower by about 9% or $249 million
*Paid Clicks, the frequency at which users click on Google-site + partner site advertising, grew 19% year over year from 2Q07 (they grew 47% from 2Q06 to 2Q07)
*Goog's Free Cash Flow, 2Q08 cash flow from operations minus capital expenditures, grew 54% year over year to $1.07 Billion (from $655 million in 2Q07)
*Goog's CASH position as of 6/30/08 was $12.7 Billion
*As 6/30/08, Google's total employee count was 19.6K employees including +448 during 2Q08...for comparison's sake, Goog added +1,548 during 2Q07
*Google's 2Q08 Effective Tax Rate was 24% (down from 2Q07's 25.5%)
Conference Call Quotes:
* Eric Schmidt, CEO of Google, on Youtube: "On the YouTube side, we are enormously happy with YouTube. YouTube is a cultural and end user success that is far, far greater than we ever expected. On the revenue side, we are working on revenue scenarios and new revenue products. I personally do not believe that the perfect ad product for YouTube has been invented yet. We’ve just brought out some little in-video ads which look very good...I think it’s axiomatic that a new form -- and I view YouTube as a new form of video entertainment -- will not ultimately use the old forms to monetize. There will be new monetization forms that will go for the new entertainment form, and that’s what we’re seeking. That is the Holy Grail. When we find it or the combination of it, it’s likely to be very, very large because of the scale and scope of YouTube."
* Jonathan Rosenberg, SVP of Product Management, on Mobile Search: "I’d just like to give you an example of one of the (search) dynamics that will be different on the mobile phones (vs. pc's). We’ve been talking for awhile about the fact that when you are on a mobile phone, you are much more likely to be interested in consummating a transaction if you run a search. One of the winners of the 1,700 applications submitted for the Android Developer Challenge was a product that was developed called Android Scan. Basically what it allows a user to do is take a picture of a product with a barcode and then they can research the product on their mobile browser. They can do price comparisons, they can figure out how far a store that can actually sell that product might be, or they could actually figure out who to buy it from online. Imagine the value of an ad in that kind of a scenario. So the bidding mechanisms for some of the local ads will differ in terms of the efforts that we have to scale to get them onto mobile but in many ways, they could be much, much more valuable."
* Sergey Brin, Founder and President of Technology, on Smartphone Usage + impact on Mobile Search: "...these better devices -- devices with great browsers like the iPhone that make it easy for people to search and then view the results -- they definitely have much higher usage per device than other kinds of devices. On a rough order of magnitude, imagine that by 30 times as many searches per user might be done by an iPhone user as compared to a conventional cell phone. So I think as you see more iPhones out there, as you see more other phones that also start to have capable browsers and input methods, I think you’re going to see tremendous growth there.
* Eric Schmidt, CEO of Google, on the Economy's impact to Google: "...in fact Google has continued to do well. There is obviously evidence of a slowdown in the U.S. and Europe; you read it in the paper every day. We continue to believe that we are very, very well-positioned in such a slowdown and especially if it gets worse. The reason is there’s a flight to quality and in particular a flight to measurability. So our economics are more driven by, for example, if people stop searching for something we might not be able to do ads against it.
* Hal Varian, Chief Economist, on the Economy's impact to Google: "When we look across sectors of the United States we see that on a year-on-year basis, the query growth has been positive in every sector we track, even including those sectors that are generally economically sensitive such as automotive, real estate and travel. We also see that year-on-year revenue growth is positive in every major sector expect for real estate, and even that one is only down by a small amount...So to summarize, when we look across verticals we see that consumers are being cautious in their online spending patterns just as they are in their offline spending. Despite the weakness in the economy, advertising revenue seems to be holding up remarkably well in most sectors. I think this illustrates the point that we have made several times. During periods of slow economic growth, the last thing an advertiser wants to cut is its spending on search-based advertising...On the consumer side I already mentioned that some durables like consumer appliances and furnishings were holding up pretty well. In fact, if you look at apparel and shopping people are still spending money online in a pretty strong way. I think part of what is happening is that as times get a little uncertain price-sensitive consumers are going to shop more carefully to try to make every dollar count. That means they are going to be doing research online and they are going to be doing shopping online. So I think we have a little bit of the Wal-Mart Effect going on that as times get tough, people are going to watch their dollars. In many cases that means doing more shopping online (and 'searching')."
Full Disclosure: I own shares of GOOG and AAPL.
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