October 16, 2009, 12:00 AM

Google says the worst is over as ad clicks increase 14% in Q3

Google, which derives much of its revenue from e-retailers’ paid search ads, posted a 7% rise in revenue from a year ago and a 14% rise in clicks on search and display ads. Another sign of recovery: the average cost per click was up 5% compared to Q2.

Google Inc., which derives much of its revenue from online retailers’ paid search ads, reported a 7% year-over-year increase in revenue and a 14% increase in clicks on search and display ads. Another sign of recovery: the average cost per click was up 5% compared with the second quarter of this year, although it was still down 6% from Q3 last year.

“While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future,” says Google CEO Eric Schmidt.

Google’s financial results align with signs that search marketing spending and revenue is recovering after hitting a low in March of 20% below the level of 2008, says George Michie, CEO of search marketing firm Rimm-Kaufman Group LLC. “Since then we’ve been on a steady climb back to 2008 numbers,” Michie says. He expects to see year-over-year growth in pay-per-click spending and revenue in the fourth quarter, but adds, “this will be less a function of consumer enthusiasm this year than it is of really lousy numbers last year.”

While 7% revenue growth is strong, it’s in line with the 7% growth in search traffic Google has been experiencing for the last seven or eight quarters, says Rich Stokes, founder and CEO of AdGooroo, which provides keyword-tracking tools to search marketers. “The uptick can be attributed more to the overall trend rather than increased enthusiasm on the part of advertisers,” he says. AdGooroo recently reported that 81.2% of search advertisers placed ads on Google in the third quarter, versus 26.0% on Yahoo and 12.8% on Bing.

In its third quarter financial report, Google reported:

  • Revenue was $5.94 billion, up 7% from $5.54 billion.
  • Google’s own sites, including its search engine results pages, generated 67% of revenue, while its AdSense network that places ads on others’ sites accounted for 30% of revenue.
  • Aggregate paid clicks on Google sites and through AdSense increased 14% over Q3 last year and 4% over Q2 of this year.
  • 53% of revenue came from outside the United States.
  • Mobile search volume increased 30% in the third quarter over the second quarter.

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