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Google: Q4 revenue up but profit down

Profit drop attributed to investments in AOL and Clearwire

Google revealed that its revenue for quarter four of 2008 grew by 18 percent, but profits fell.

Google's revenue for the quarter was £5.7bn. After subtracting the commission it pays to its ad network partners, Google's revenue came in at $4.22bn. Net income was $382m or $1.21 per share, down from the $1.2bn or $3.79 per share, recorded in 2007's fourth quarter.

One-time investment write-offs, such as the $1.09bn Google invested in AOL and Clearwire, were the primary cause of the earnings drop.

"We had strong search query growth year-on-year, revenues were up in most verticals, and we had tight control of our costs, something which eluded us perhaps in the past, but we got the formula down now," CEO Eric Schmidt said.

"We had a strong quarter and what turned out to be a strong year, and business is quite healthy, especially given the tough economic climate."

Google exceed revenue predictions by Thomson Financial, which saw a forecast of $4.12bn.

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Google-owned sites generated 67 percent of the fourth-quarter revenue, while 30 percent came from ad network partners. Although Google didn't say, the remaining three percent probably came from smaller sources, such as the Enterprise business.

Google executives expressed continued confidence in the company's business model, which relies overwhelmingly on pay-per-click (PPC) text ads delivered along with its search engine results and in web pages of third-party sites.

This type of ad is the most popular online format, accounting for about 40 percent of online ad spending, and Google has a market share of about 75 percent of search ad spending, according to various industry estimates.

"Our core focus is on the huge, untapped potential of search and ads," Schmidt said.

"Wouldn't it be nice if Google understood the meaning of your phrase, rather than just the words that are in the phrase? We have [done] a lot of discoveries in that area that are going to roll out [soon]," Schmidt added.

See also: Google shuts down Firefox 2.0 phishing blacklist

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