Google Reports Strong Q1, Surprising Some

Google nailed its first quarter, reporting net income of $1.31 billion on $5.19 billion in revenue. Revenue growth in the U.S. market was 30 percent, while total revenue growth was 42 percent without deducting traffic acquisition costs.

All eyes were on the company’s click growth ahead of its earnings release today, and Google didn’t disappoint. Aggregate paid clicks on Google and its partner sites grew by 20 percent over the year ago period and 4 percent since last quarter. ComScore reported click growth was flat or down during the first three months of the year, leading some to speculate consumer economic nervousness led to fewer shopping-related searches and harm to the company’s revenue growth. Google didn’t break out click growth trends on its own sites versus its network.

“Paid click growth is much higher than has been speculated by third parties,” said Google CEO Eric Schmidt. “In search, we continue to invest in quality both here and internationally…. We’re showing fewer but much better ads in each cycle, and that’s a key part of the Google success story.”

Google finally closed its DoubleClick acquisition during the quarter, a deal Schmidt called “hugely strategic.” Google plans to eventually combine its AdSense network with DoubleClick’s display ad management product. That acquisition accounted for about 1,500 of the approximately 2,300 employees Google added in the period. Ten percent of DoubleClick’s staff was laid off in the wake of the deal’s closure.

Partner site revenue was $1.69 billion, or 33 percent of the total, while revenue from Google’s own sites made up the remaining $3.4 billion. According to CFO George Reyes, revenue growth on Google.com was up 49 percent, driven by strong traffic increases and, to a lesser extent, monetization growth.

International growth continued to boost the company’s bottom line. Operations from outside the U.S. contributed over half of the company’s total revenue (51 percent) for the first time, contributing 51 percent of all revenues in Q1, compared with 47 percent a year ago.

The company also cited adoption of its AdSense for Video ads, and higher-than-banner click-through rates for the placements. During the quarter, Google added a benchmarking feature for Google Analytics.

Google’s upbeat results come as two search agencies reported generally strong growth in client spending. SearchIgnite’s mostly retail clients increased their year-over-year expenditures, but spending growth waned toward the end of Q1. Meanwhile Efficient Frontier found travel-related ad spending exhibited strong growth while financial advertising shrank.

Google’s Schmidt said the company had not observed any negative impact on its business based on macro-economic conditions. “We’ve looked at this really carefully, and we do not see an impact as of this time,” he said.