Finances point to reasons for search battle

22 July 2005 Search engine maker Google continues to show increasing profitability as it continues to attract a significant proportion of online advertising revenues. But that revenue stream is under threat, not least from software titan Microsoft.


For the quarter ending 30 June 2005, Google reported profits of $342.8 million on revenues of 1.348 billion. That compares to profits of $79.1 million on revenues of $700.2 million in the same quarter a year previously.

Since its flotation Google has posted a series of stellar results and claims that it is growing its market share in an otherwise sluggish online advertising market.

But Google’s success has attracted interest from competitors, keen to take away the advertising spend, and undermine Google.

One of its chief competitors is software giant Microsoft. It too recently reported a set of financial results. For its fourth quarter ending 30 June 2005, it posted profits of $3.70 billion on revenues of $10.16 billion. For its full year, it recorded profits of $12.25 billion on revenues of $39.79 billion.

Microsoft’s results show that it continues to be a hugely profitable business. However, one of its core strengths, its Office line of productivity software, delivered little growth: year-on-year revenues were almost flat.

Executives at Microsoft are aware that there is little room for growth in its Office line, and have been looking at new sources of income. One of these is its online division, MSN. And Microsoft has identified the need of a strong search engine to underpin its online presence.

So while Microsoft’s revenues currently dwarf those of Google, the search engine company could find its revenues under increasing pressure.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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