May 2, 2008, 12:00 AM

Google attributes revenue growth to tech innovation

Ongoing innovation in search, ads and applications helped drive up first quarter revenue 42% year-over-year to $5.19 billion, as Google also improved the quality of its search results, the company says.

The wheels of innovation at search engine leader Google Inc. continue to spin, playing a key role in driving up first-quarter revenue 42% to $5.19 billion from $3.66 billion a year earlier, the leading search engine says.

“Our ongoing innovation in search, ads and applications helped drive healthy growth globally across our product lines,” CEO Eric Schmidt says.

In addition to improving the relevancy of its paid search ads, Google’s innovation is conjuring up new reasons to drive visitors to its growing stable of web properties as well as to the Google paid search ads hosted by its AdSense partners, he adds.

Google generated two-thirds of its first-quarter revenue, or $3.40 billion, through its own network of sites such as and; the remainder, $1.69 billion, through the AdSense program, the company says.

Among technology developments launched within the past few months by Google, for example, are:

  • A streamlined interface for using Google search, Gmail and other Google features on iPhones, including the ability to directly access iGoogle Gadgets for personalized information on stocks, news and weather.
  • Version 5 of the Google Toolbar, providing for tighter integration with Google search, Google Gadgets and other Google tools.
  • A common set of application programming interfaces with MySpace for distributing Google applications throughout the social network, and the ability to post videos on a retail site next to related product links.

Google’s drive toward technology innovation is also behind improved quality in its paid search ads that produced higher click-through rates in the first quarter, the company says.

By improving its search technology to avoid accidental clicks and show only the most relevant ads, “we’re showing fewer but better ads,” Schmidt told financial analysts in a first quarter conference call.

Schmidt’s contention squares with data from search marketing firm Efficient Frontier that shows the average click-through rate on Google search ads improved by 19.2% in the first quarter over the first three months of 2007, while cost-per-click (excluding the hard-hit financial services sector) went up 11.2% and advertisers’ return on investment improved by 24%.

“Google’s ongoing efforts to improve the user experience by reducing unnecessary impressions and clicks appeared to increase efficiency for advertisers by improving click-through rates,” Efficient Frontier wrote in a report last month.

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