Reporting third-quarter results after market close Thursday, Google (GOOG) topped estimates, posting net income that rose to $1.64 billion, or $5.13 a share, from $1.29 billion, or $4.06 a share in the same period last year. Net revenue for the period ended in September rose nearly one percent to $4.38 billion. Excluding items, earnings for the quarter were $5.89 a share. Consensus estimates had been calling for $5.42 a share and $4.24 billion in net revenue. The chart below shows revenue sources within Google (click to enlarge).

Impressive. Seems paid clicks grew 14 percent compared to the same period last year, and four percent compared to the prior period. Cost per click was down six percent year over year, but up five percent sequentially.

“Google had a strong quarter–we saw seven percent year-over-year revenue growth despite the tough economic conditions,” said CEO Eric Schmidt. “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.”

Good to hear. Google’s shares, which have already risen more than 50 percent in the past six months, are on another upward tear. They rose 1.82 percent to $539.27 on the news in after-hours trading.

Earnings call highlights via The Wall Street Journal’s Andrew LaVallee:

4:32: Call starts. The cast is the same as last quarter: Mr. Schmidt, CEO; Patrick Pichette, CFO; Jonathan Rosenberg, SVP of product management; and for the first time, Nikesh Arora, president of global sales operations and business development. But there’s a twist–they’ll be using Google’s moderator to vet questions with voters. They vote on “the most relevant questions,” which go to the Google execs, the operator says.

4:35: “While there’s obviously a lot of uncertainty about the pace of the economic recovery, we believe the worst of the recession is behind us,” Schmidt says.

He adds that Google now has the confidence to invest “heavily” in its future. “It’s all good news from our perspective, at least in looking at the quarter.”

4:37: Says “we want to really get to the perfect search engine” and that many advertisers would like to spend more with Google if the company’s product allow them to do that.

4:38: Schmidt says “we’re open for business in making strategic acquisitions, both large and small.”

4:39: It’s Pichette’s turn. “At a high level, we’re very pleased with our Q3 results,” he says. The quarter benefited from growth in AdSense for content and display initiatives.

4:41: U.S. revenue up 4% to $2.8 billion. U.K. revenue decline affected by foreign exchange as well as ongoing macroeconomic weakness, Pichette says.

4:42: Operating expenses rose from the prior quarter, mostly due to payroll, equipment and facilities-related expenses.

“We believe the worst of the recession is behind us,” he says.

4:44: Brazil was a standout in Latin America, Arora says. We’re beginning to see signs of recovery in Europe and Africa, particularly Spain. In Asia, China performed strongly as an emerging market.

4:46: Looking at the display-advertising business, those have also shown strong results, he says.

On YouTube, new advertisers and partners are helping with monetization efforts. Ninety percent of the top 50 advertisers have run YouTube campaigns with successful results–recent examples include McDonald’s and Hewlett-Packard.

4:47: YouTube has signed deals with all four major record labels and several independent labels. Earlier today, Google announced a partnership with Channel 4 in the U.K., which will bring full-length programming to the video-sharing site.

4:48: Arora adds a personal shout-out to the sales team.

4:50: Rosenberg calls the new AdWords front-end one of the company’s biggest investments of the year. Advertisers have new reports, can run more efficient campaigns and can get new features faster thanks to the platform, he says.

Now, three years after Google (GOOG) plunked down $1.6 billion for the video site, it seems to have figured out an approach that works for at least some big players: Hand over a chunk of the site to content creators, who get to control it, sell ads on it, program it with their stuff and share some of the ad dollars.

It’s a pretty straightforward compromise: YouTube gets some of the ad dollars that “premium” content–stuff you’d see on a TV screen, basically–can generate; content creators get access to the the gazillion eyeballs that the world’s biggest video site attracts. Examples: See the pacts that Sony (SNE), Disney (DIS), Time Warner’s (TWX) Turner, Warner Music Group (WMG) and Universal Music have hammered out in recent months.

And that sounds like the deal that YouTube and Britain’s Channel 4 have reached. Telegraph:

YouTube and Channel 4 have been in talks for at least the last six months and a contract is expected to be signed imminently. The Telegraph understands that Channel 4 has negotiated the right to sell its own advertising around its content on YouTube and share the revenue with the Google-owned site.

A senior television source close to Channel 4 said: “It was key for Channel 4 to be able to sell the advertising around its own inventory so it could extract maximum value from the deal and retain commercial control over its own property.

“When the Channel 4 content formally appears on YouTube, it will be branded exactly the same way as it is on the Channel 4 website. It will be a fully Channel 4 branded space and look as if someone has picked up 4 on Demand (Channel 4’s online catch up service) and put it on YouTube.”

…The partnership will be the first formal arrangement YouTube has agreed with a British broadcaster in which the majority of its content will be shown in full on the video-sharing site.

No comment from YouTube. If the report doesn’t pan out, I’m assuming it won’t have any impact on anyone reading this in the U.S.: The Web is worldwide, but these content deals tend to be specific to various territories, which means you won’t be able to watch British programming from the States. Fair enough: My non-U.S. readers always gripe about not being able to watch Hulu clips.

It seems the media industry across the pond is taking its cue from Hulu, the fledgling U.S. online video effort from NBC Universal and News Corp., at offering consumers TV content online in better and more flexible ways.

Three of the main British TV networks–the BBC, ITV and Channel 4–are planning a joint on-demand service, so consumers can see professional video programming of all kinds in one place.

It’s another step in the right direction by media giants for consumers–well, in Britain, at least.

Such a move is akin to all four U.S. majors (CBS, ABC, NBC and Fox) joining together in a helpful service. But don’t hold your breath on that happening anytime soon.

I gave good props to Hulu, which debuted recently, noting it was the first time traditional media companies had created a product that was more aimed at consumers than protecting their own vested interests.

But the Hulu service also is frustrating, like having a television set that only gets a small number of stations and then having to use another TV and then another if you want other channels.

Television’s success had a lot to do with it being a one-stop destination, while online video on the Web is still dispersed in ways that makes it hard for any one thing to take off.

Perhaps it cannot be that way on the Web for U.S. users, despite many efforts to do so, but such a confused approach hinders the distribution of professional online video content. (The user-generated vomiting-cats-on-skateboards fare does fine on its own in getting found.)

So, it will be interesting to see what happens with the U.K.’s effort.

Set to be launched in 2008, Britain’s version will add free downloads and purchase (something Hulu does not do now), as well as streaming, rental and eventual distribution to other platforms.

The BBC, for example, has tried this on its own with its much maligned iPlayer service. Said one British techie I asked about it on a recent trip: “It’s grotty.”

The iPlayer will continue, as will ITV’s current online service. Channel 4′s 4oD will cease to exist.

Channel 4 CEO Andy Duncan said that’s because the new effort would “give viewers ultimate control over what they watch and when they watch it.”

Of course, that’s bloody brilliant.