Google grew its revenue and profits in the second quarter, but while revenue topped Wall Street's expectations, profits fell short.
Google generated revenue of US$6.82 billion in the quarter, ended June 30, up 24 percent year on year, the company said Thursday.
Subtracting the commissions and other fees Google pays advertising and other partners, revenue was $5.09 billion, exceeding a consensus estimate of $4.99 billion from analysts polled by Thomson Financial.
Net income came in at $1.84 billion, or $5.71 per share, compared to $1.48 billion, or $4.66 per share, in the second quarter of 2009.
On a pro forma basis, which excludes certain one-time items, net income was $2.08 billion, or $6.45 per share, short of the $6.52-per-share consensus expectation from financial analysts.
"Google had a strong second quarter," said Google CEO Eric Schmidt in a statement. The company had solid growth in its core business of search advertising, and "very strong growth" in its emerging businesses, Schmidt said.
Google sites were responsible for 66 percent of the total revenue, while partner sites generated 30 percent. More than half of the company's revenue -- 52 percent -- came from outside of the U.S.
Paid clicks, which are search ads on which people clicked, thus triggering a fee for Google from the advertisers, increased about 15 percent year on year, but fell about 3 percent from 2010's first quarter.
The cost of paid clicks, which is the money Google charges advertisers when someone clicks on a search ad, increased on average about 4 percent year on year and about 2 percent from 2010's first quarter.
Google makes most of its revenue from this type of pay-per-click ad that runs along with its search engine results and in Web pages of sites that belong to Google's advertising network.
Google's stock closed at $494.02 on the Nasdaq exchange, up slightly during the regular day's trading, but it had fallen 4.17 percent in after-hours trading shortly before 6 p.m. U.S. Eastern Time. In the past year, the stock has ranged between $423.50 and $629.51.
"We're very pleased with our Q2 results," Chief Financial Officer Patrick Pichette said during a conference call to discuss the results.
Large advertisers that spend a lot on display ads, like banners and video spots, are increasingly incorporating search and mobile ads into their online marketing mix, a trend Google is focused on tapping into, he said.
Google's display ad revenue, historically a weak spot for the company, continues to grow, anchored largely by YouTube, the video sharing site whose massive popularity Google has tried to leverage for years to jump-start its display business.
However, when asked if YouTube is now a profitable operation, Google executives declined to answer. Google bought YouTube in October 2006 for $1.65 billion.
Pichette did say that Google is overjoyed at the dismissal in June of Viacom's $1 billion lawsuit against Google over what Viacom alleged was massive copyright infringement of its movies, TV shows and other content by YouTube.
Pichette said Google spent about $100 million to defend itself during that nasty legal battle, which raged for more than three years and may continue, since Viacom has pledged to appeal the decision by Judge Louis L. Stanton of the U.S. District Court for the Southern District of New York.
Google is also seeing strong growth both in search queries and advertising in mobile devices, he said. Google's Android mobile platform continues to do well, with about 160,000 Android-based phones activated every day, he said.
Another emerging business, enterprise software, is also performing well, he said. The main product in that division is the Google Apps hosted collaboration and communication suite.
As of June 30, Google had $30.1 billion in cash, cash equivalents and short-term marketable securities, up from $26.5 billion at the end of the first quarter.
Google's worldwide full-time staff increased to 21,805 employees as of June 30, up from 20,621 employees at the end of the first quarter.
The increase includes employees arriving through acquisitions, like the $750 million purchase of mobile ad provider AdMob, which closed in May, but also many new engineers and salespeople hired to work in emerging businesses where Google sees big growth opportunities, Pichette said.