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What’s behind Google’s record quarter

AP Photo/Mark Lennihan
Google’s experiments in hardware are promising, but the company’s main business model isn’t showing signs of changing.
CaliforniaPublished This article is more than 2 years old.

Google generated more revenue than ever—$14.9 billion—in the just-reported third quarter of 2013. That was up 12% on the same quarter of 2012, beating street expectations and sending the stock up 6% in after-hours trading. So how did the company do it? Advertisements on good old-fashioned search.

The majority of Google’s revenue—$9.39 billion or 69%—was generated on “Google-owned sites.” While Google doesn’t break out the percentage of that revenue that’s due to search, you can bet the company isn’t making that kind of money on ads appearing in Gmail or Google Plus.

Revenue on Google’s sites was up 22% from the third quarter last year, which shows that for the past year at least, there were a surprising amount of search advertising dollars yet to be captured by Google. Overall, the amount of money Google made when users click on advertisements was up 26% since last year and 8% since last quarter.

The company’s revenue on advertisements appearing on sites other than Google—so-called “network revenues”—were actually flat year over year. And Google’s non-advertising revenue continues to be a tiny proportion of the company’s overall business—just 9% of revenue.

The takeaway

All of these trends indicate that Google’s business continues to be the one thing for which it’s best known—search. For the company, the fact that the core engine for generating revenue continues to yield strong results is good: It means it can keep funding its various far-out projects. But the flipside is that it’s not yet learning to make money from much else—and while this was a strong quarter, the overall trend of revenue growth is slowing, which investors won’t like as much.

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