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Summary
conference date: April 20, 2006
for quarter ending: March 31, 2006 (1st quarter)
Overview: Another fantastic quarter of growth in revenues and profits. Lots of good Q& A (see below).
Basic data: Revenues of $2.25 billion (up 17% from prior quarter) and GAAP net earnings of $592 million or $1.95 per share (up 60% from the prior quarter).
Guidance: Q2 and Q3 have traditionally slower revenue growth. Other than that does not give forward guidance. Capital expenditures to grow faster than revenues.
Conference Highlights:
Quality of search is basic reason for rapidly increasing revenues and earnings. Rapid growth internationally including ad-sense. 42% of revenue was international. UK and France particularly strong.
Mobile is a major strategic area.
Locally targetted ads are a major contributor to revenue growth.
"Careful and measured" investments in business. Retail, finance and travel verticals are strong.
59% year-over-year gains in ad-sense revenues.
$607 million in operating expenses (excluding cost of traffic acquisition (TAC) ).
"Potential for compression in net and operating margins."
Cash balance (excludes $1 billion investment in AOL and result of stock offering) of $8.43 billion.
First quarter saw all time low in search spam. Toolbar 4 beta has many great features. Several new releases, notably Google finance and Google calendar.
Acquired groundbreaking technologies, including for targetting ads to radio, Upstartle Web-based documents, etc.
"Google is now the world's fastest innovator." Reiterated goal to organize all the world's information.
Q&A:
Expansion of product lines is producing what kind of revenues so far and into next 12 months? Not yet a significant component of revenues, but expect to be in the future. Many are still in Beta.
Mobile transcoder competitive landscape? Automatically translates Web pages to phone-formats; not a new notion, just a better implementation.
Rate of growth in US market? External data is correctionally correct; Google gaining market share. Avoided giving range.
China market share 3rd party data indicates Google not gaining? #2 in China and holding, but investing heavilly.
Would Google's future include paying for content? Google does not think that way; attempts to find new uses of Internet that meet clients needs. [That appeared to be a No.]
Dell experiment? Excited by Google being available out of the box.
AOL pay-per-call competition? Just alpha-testing Google version.
Spending plans? No real answer. Wireless plans? Experimenting in San Francisco with ad-supported Wi-Fi.
Advertisers say unspent budgets with Google. Any way to unlock it? Legacy of system architecture issues. Google's main opportunity is improving statistical algorithms for ads. Limited budgets are more of an opportunity.
EBIDTA around $1 Billion? Yes.
Pricing trends for ads? Click-through rates? No real answer. Revenue-per query a better metric, and they watch it closely.
Social networking? Exciting, already has a site that is well-known in Brazil. From search point of view Google wants to be comprehensive, so that main Google search results include social network results.
Local ads? Defines a radius around a location. Now introduced on-map ads with map pins. Long-run will link inventory availability.
Adding search partners; losses of significant partners is rare.
Made it clear Google is in investment mode and plans to make continuing investments in new products and international expansion.
Seasonality? The same as always.
Why has TAC (traffic acquisition cost) been trending down over time? Main influence is large, contested deals.
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