Next two quarters will prove online ad worth to Google

Google's strong third quarter profit of $1.35bn comes as no real surprise, says Justin Speake, chief executive at Bloor Research.

Google's strong third quarter profit of $1.35bn comes as no real surprise, says Justin Speake, chief executive at Bloor Research.

"Earnings for the next two quarters will be much more interesting because these will provide a much clearer indication if Google has indeed managed to rise above the most recent financial market turmoil," he said.

The Google results represent an increase of 31% compared with the same period last year and an increase of 3% compared with the second quarter of 2008.

Although shares have dropped 49% in the past year, Google's latest profit figures support the firm's optimistic financial outlook based on confidence in online ad revenues.

"Advertisers are definitely moving away from TV and print to online because there is a much more measurable return on investment, but overall budgets are not yet seeing dramatic cuts," he said.

This may change, said Speake, as businesses begin to feel the effects of the latest financial uncertainty and so it remains to be seen whether online advertising will continue to buck the downward trend.

Google's financial results immediately lifted investor confidence with share prices rising by over $44 to $397 in extended trading after closing on the Nasdaq at $353.

Eric Schmidt, chief executive officer at Google, said, "We had a good third quarter with strong traffic and revenue growth across all of our major geographies, thanks to the underlying strength of our core search and ads business."

Google said advertising revenue, including clicks related to ads served on Google sites and the sites of its AdSense partners, increased approximately 18% over the third quarter of 2007 and increased approximately 4% over the second quarter of 2008.

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