08:04 AM

GOOG: Profit up 92%, revenue 70% - Feel the power

Google reported unbelievable growth in the third quarter, with revenue up 70 percent to $2.69 billion and profits up 92% over the year-ago quarter. (Financial Times). Net income more than doubled, from $381.2 million to $733.4 million.

Virtually all of Google's income comes from advertising, either on its own sites - revenues up 84% - or on its ad networks - revenues up 54% but representing a flat piece of the pie.

Contrast this with Yahoo's lousy numbers and falling advertising shares and the writing is on the wall. Yahoo cannot compete. It's new advertising engine changes nothing.

Marshall Kirkpatrick at TechCrunch notes:

Nielsen//NetRatings came out with new numbers today finding that Google’s market share in search has grown 24% over the last year to 50% of the total market. Yahoo! grew 12% to 23% market share and MSN/Live dropped 8% to a 6% market share.

Fifty percent? Those are near-iPod numbers for market dominance. Think IE7's hard-wiring of search to Microsoft's search engine is going to make a dent? Forget it. Google rules search-based advertising. Can you imagine a world in which virtually all advertising dollars flow to Google?

Yes - it will be like dollars flowing to Microsoft in the PC era. Except that Microsoft dominance allowed an ecosystem in which applications developers and hardware makers also made tons of money. Google will have to create as rich an ecosystem, in which content providers are really partners and not just fodder for Mountain View's currency printing press.

From TechCrunch:

Sergey Brin started his discussion with the addition of historical archives in Google News, video search, Google Apps for Your Domain, and Google Docs. Brin said in response to questions that integration, or “Features not Products” is an important direction the company wants to move in for the future. Which is it? Diversity is our strenght or product overload? Maybe that just means we’ll see fewer new Google products, but they are glad they have as many as they do.

Larry Page said Google has the greatest diversity of advertisers in the world because it’s easy to get involved in search, video and soon audio advertising. Page also highlighted the addition of coupons to Google Maps.

The future remains some what unclear with an office strategy that could succeed or fail, a video strategy that will face legal challenges and the first big competition in contextual advertising ramping up - but Google is looking well prepared for dealing with all of those challenges. While the rest of the big tech companies are experiencing relatively turbulent times, Google put the numbers on the table today to prove that they are going strong.

Hmm, from where I sit, GOOG owns text-based advertising, they own the single biggest video content site, they putting together the pieces of a Microsoft-free computing environment. The major danger, as Tom said yesterday, is that they will put their own (willing or unwilling) partners out of business.