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Last Updated: Friday, 22 October, 2004, 14:05 GMT 15:05 UK
Q&A: Google's post-flotation results
A man eyes Google search engine
Google remains the one to watch - for the present

Search engine Google has just released its first set of financial results as a publicly listed company, following its flotation in August. So how does the firm operate, and what will its future be?

How come Google can make its money if it doesn't charge me for using it?

It may not charge you - but you pay for it anyway. Or rather, your eyeballs do.

Much of Google's revenues come from the most traditional source of all: adverts.

The firm has always eschewed big banner adverts, but the inch-square ads which look like classifieds, which appear at the top and down the right-hand side of the web page, bring it a lot of money.

It also makes a smaller slice of money from adverts on partner websites which offer a Google-powered search.

And a much smaller chunk - so far just 1% of the total - come from licensing its technology to other companies to index and search their networks.

So is it working, then?

It certainly seems so.

The company scored revenues of $805.9m for the three months to September - a period which includes its much-trumpeted flotation in mid-August.

The figure was up 105% on the same period of 2003.

Operating profits were down to just $11.4m for the period from more than $60m the previous year, but then again that was after the company had accounted for a $201m one-off payment to rival Yahoo to settle a patent dispute.

Amazon's A9 search engine
Even Amazon is getting in on the search business
Net profits were $52m - or $125m once the Yahoo charge and one-off tax benefits are stripped out.

Is that good?

So Wall Street seems to believe.

The flotation - which set its price via a complex Dutch auction - ended up selling shares for $85.

Two months on, they're now worth more than $150.

Brokers and analysts are now upping their estimates of how they think Google will do in the coming months.

And can it go on like this?

Clearly, search is big business.

And unsurprisingly, others are keen to get in on the act.

Yahoo is smartening up its act after it bought three search engines - Inktomi, Altavista and Overture.

Microsoft has promised to launch a much improved search solution within the next two years.

And books-and-everything-else merchant Amazon has now launched its own search engine, A9 (although A9's underlying technology is provided by Google itself).

This web search stuff is all very well, but I still can't find the email I sent my boss last week.

You're not alone. Indeed, what's known as "desktop search" is the next frontier in this business.

Lookout email search, bought by Microsoft earlier in 2004
Microsoft is buying up search technology
Many users curse their computers when they find it impossible to track down an elusive bit of information from a long-forgotten email, letter or document.

Google's latest experiment, Google Desktop Search, installs a program which will go through your hard drive and stick up the results in your web browser, just like the normal Google search.

If it can get you using its stuff on the desktop, so one argument goes, you' re that bit more likely to keep your valuable eyeballs glued to its website as well - and the ads that appear there.

A number of other programs exist to do the same thing - two of the leading contenders have recently been bought by Microsoft and Yahoo.

Microsoft's move is interpreted by some as a scramble to catch up, because the Washington-based software giant recently had to admit that it would not have its own advanced desktop search technology ready in time for the launch of Longhorn, the much-delayed next generation of Windows now due in late 2006.

Apple, meanwhile, is loudly pitching its own Searchlight technology, due to appear in a forthcoming iteration of its Mac OS X operating system, which is expected to ship in the first half of 2005.

Google earnings surge on ad sales
22 Oct 04 |  Business
Google rolls out corporate search
20 Oct 04 |  Business
Google shares rocket on first day
19 Aug 04 |  Business
Google cuts IPO share price range
18 Aug 04 |  Business
Search business turns serious
27 May 04 |  Technology

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