Google’s profits more than doubled in the second quarter, as the company continued to increase its share of the lucrative search advertising market.
The company, which announced results yesterday, exceeded analysts’ expectations for both sales and profit. That is in contrast to Yahoo, which disappointed Wall Street Tuesday with lower-than-expected revenue from search-related advertising. Yahoo met profit expectations because it postponed some hiring and advertising spending.
In after-hours trading, shares of Google rose nearly 1 percent, to $390.55. The stock has fallen this week in sympathy with Yahoo, which dropped 22 percent on Wednesday. Shares of Yahoo rose 0.3 percent yesterday, to $25.27.
Google, based in Mountain View, Calif., attributed its success to several areas in which Yahoo fell short. The company said it continued to develop technology that increases the advertising revenue it earns from each search, while Yahoo said its already delayed effort to build such technology would be another three months late.
Google also continued to expand the number of sites that display advertising it sells, while Yahoo is still absorbing the loss of its largest advertising client, MSN from Microsoft, which is selling its own advertising.
“We did really, really well in a quarter that is seasonally slow,” said Eric Schmidt, Google’s chief executive, in an interview. “Big companies as they get larger seem to slow down. We continue to innovate.”
Google earned $721.1 million, or $2.33 a share in the quarter, compared with $342.8 million, or $1.19 a share, in the period a year ago. Excluding charges related to stock-based compensation and a gain from the sale of its shares in Baidu, the Chinese Internet company, Google earned $2.49 a share. Analysts had expected the company to earn $2.22 on that basis.
Google’s revenue was $2.46 billion, up 77 percent.
Excluding the payments it makes to companies like AOL that carry its search advertising, Google’s revenue was $1.67 billion, up 88 percent. That is a bit higher than the $1.65 billion that analysts expected.
In a conference call with investors, Mr. Schmidt said that one top company priority was to expand its advertising business. One aspect of this is to build services for graphical and video advertisements of interest to brand marketers, the strongest area of Yahoo’s business.
It also wants to expand its advertising auction system into other media; in that system, advertisers bid to have ads displayed on Web pages. Within three months, Mr. Schmidt said, Google will integrate the radio advertising system from its acquisition of DMark Broadcasting into its main service. He did not say what this integration would entail.
The company hopes to start selling advertisements on mobile phones, a service it offers in Japan.
Google continued its breakneck expansion, adding 1,152 employees in the second quarter, leaving it with 7,942 employees on June 30.
Sergey Brin, Google’s president for technology, said the rate of hiring had slowed. The employee base grew 20 percent in the first quarter but only 17 percent in the second quarter.
“That gives us more time for people to get up to speed,” he said.
Safa Rashtchy, an analyst with Piper Jaffray & Company, said that Google did seem to be able to manage the expansion. “They are on a hiring frenzy, yet their expenses seem to be under control,” he said.
Mr. Rashtchy noted that spending on marketing was lower than he expected, given that Google had announced some high-profile deals, like an arrangement to install software on computers made by Dell Inc.
Google spent $699 million on capital projects in the quarter, including $319 million on real estate. The rest went for computer servers and related technology, mainly to support its search service.
George Reyes, the chief financial officer, said that capital expenses would probably increase over time. He assured investors that these investments were “prudently thought out” and the company was purchasing property, rather than leasing it, because it would save money in the long run.
Google’s revenue from its own network of Web sites continued to grow faster than that from other sites for which it sells advertising.
Google’s sites produced revenue of $1.43 billion, up 94 percent.
Revenue from sales on other sites — deducting the payments made to those sites — was $212 million, up 56 percent.
The company said its business was especially strong in Europe but that it lagged in most of Asia.
