Google’s Q2 revenue jumps 58%, while hiring spree cuts profits

Google reported revenue of $3.87 billion for the second quarter, up 58% from the same period last year. But net income fell from $1.0 billion in the second quarter of 2006 to $925 billion this year, which Google executives attributed to faster-than-expected increases in headcount and changes in accounting for bonuses.

“Our performance once again demonstrates the strength of our core search and ads business,” says Eric Schmidt, CEO. “The growth in our global traffic combined with our ongoing improvements in monetization resulted in solid revenue growth, even in a seasonally slow quarter.”

Revenue from Google-owned sites, which represents 64% of the company’s revenue, was $2.49 billion, up 74% over the year-ago quarter and 9% over the first quarter of 2007. Revenue from the AdSense program that places ads on others’ sites totaled $1.35 billion, 36% ahead of the 2006 quarter but about the same as the first quarter of this year. Google executives said seasonality mainly accounts for the lack of growth in AdSense, which represents 35% of Google revenue. Google paid $1.15 in Q2 to partners that display Google network ads, including $1.06 billion to AdSense partners.

Schmidt said Google said there was no impact on Google’s revenue from eBay’s announced plans to shift some advertising away from Google. EBay briefly cut all advertising on Google, then resumed the ads at a lower level following a spat last month over a planned Google party aimed at participants in an eBay annual event. Google canceled the party after eBay pulled its ads.

Total paid clicks in the second quarter, including clicks on ads on Google sites and those of AdSense participants, grew 47%. Google founder Sergey Brin noted that, in order to improve the user experience, Google was in some cases reducing the number of ads it displays in locations where they are not likely to be clicked on.

Google executives promised analysts to keep a close eye on personnel costs, but investors apparently were rattled by the atypical drop in Google’s profits. Shares in the company were trading down about 5% today.