Would you like to read about foreign currency exchange and hedging programs? I know.

But Google would like Wall Street to think a bit about those topics, since it is blaming them for part of its Q4 earnings report shortfall. Google insists it had a great quarter, but both its revenue and earnings numbers came in well below the consensus.

One reason for that, Google says, is fluctuating currency rates: “Had foreign exchange rates remained constant from Q3 2011 through Q4 2011, our revenue in Q4 2011 would have been $239M higher,” the company says. Which means the company would have been much closer to investors’ revenue estimates, for starters.

But analysts on the earnings call didn’t want to spend time talking about FX — they wanted to talk about CPC. That’s “cost-per-click” for Google’s core search ad business, and it dropped 8 percent over the quarter. Google insists that is a number that they shouldn’t obsess about, since it will fluctuate based on changes Google makes to its ad products, and as long as overall revenue is going up, it’s not a problem.

That answer, which they gave over and over, didn’t take, though. And at one point, Larry Page asked, semi-seriously, for analysts to stop asking about CPC. The next question was about CPC.

————–
EARLIER
First look at Google Q4 earnings: $8.13 billion and earnings of $9.50. Wall Street was expecting much more — something like $8.4 billion and $10.50 a share.

Investors are behaving the way you might expect — they’ve dropped the company’s share price by 9 percent, to $581, in after-hours trading. Earlier today, GOOG was trading as high as $640.

“Google had a really strong quarter, ending a great year,” CEO Larry Page says, in a statement that doesn’t seem to acknowledge any weakness or slowdown. He also says Google+, the search giant’s answer to Facebook, is now up to 90 million users.

Google hired more than 1,000 people in the last three months of the year. It now employs 32,467 full-time workers.

If you’re looking for a positive spin on today’s numbers, Google is happy to help. Q4 revenue was up 25 percent over the past year, it notes, and 9 percent more than Q3.

Here, again, is Citigroup analyst Mark Mahaney’s guide to interpreting the numbers:

Google streams its earnings call (via YouTube, of course) but in case you’d like to spend your time doing something else, I’ll be listening in and taking live notes here at 4:30 pm ET:

4:30 pm: Good afternoon. Waiting for Google execs to come online to chat about Q4. Meanwhile, Google investors are shoveling shares out the door, and the stock is lurching, down more than 9 percent.

4:31 pm: Call is starting. On the line, the now-usual lineup: Larry Page, CFO Patrick Pichette, product head Susan Wojcicki, sales boss Nikesh Arora.

4:34 pm: Larry talking about “blowing past $10 billion” in revenue. Also the fact that David Beckham engaged in a Google+ “hangout” recently.

Larry talking about last week’s Google+ search revamp, “which I’m really excited about.” “To make a real impact in the world,” we need to shutter some stuff. We’ve turned off 12 projects in the last quarter, so we can double down on things like Chrome, Android, YouTube.

Android: 250 million devices, up 50 million in last quarter. Over 11 billion downloads from Android Market. “Wow.” (That’s from the script.)

“Chrome is on fire, too.” “People thought we were crazy. Who wants another browser?” But we were right!

Display (perhaps you’ve seen our piece in The Wall Street Journal just now). Now on a $5 billion run rate. DoubleClick up 130 percent year over year.

“Very pleased” with ads on YouTube.

That display ad run rate, by the way, is up 2x from October 2010.

4:40 pm: Now CFO Pichette. He’s also very pleased with the quarter. Walking through numbers:

Pichette talking up negative effects of foreign currency moves, which the company also stresses in its pullout slides. We’ll see if investors go for that (curious if analysts feel they have decent visibility into FX for GOOG).

Skipping most of these numbers, since you can get most of it from release and also via supplementary slides.

Pichette warns that Google will keep spending a lot on capex, and that that spend will be “lumpy.”

4:45 pm: Arora to talk about sales. “Strong performance across the portfolio.”

Arora lays in a series of numbers that don’t really register with me, in part because Page and Pichette just mentioned some of them. That display ad number is still quite amazing, though we would of course love to know how that’s split up between “regular” Web ads, YouTube and mobile.

Another shout-out for David Beckham. (Who I assume is still a big international star, even though I’m pretty sure the U.S. has moved on after a brief flirtation.)

An actual “shout-out”! To international business teams.

4:51 pm: Wojcicki, who starts by explaining/defending “Search plus Your World” changes rolled out earlier this month. More personalized results: Pictures friends have taken, article mom had shared, etc. Just like Facebook, which is the point.

Sorry, lost the string here. But really, this is the part that you can always skip during the call: A number-free brochure.

4:57 pm: Q&A:
Q: Did you see a big shift in mobile use over the holiday?
A: Larry: Nikesh, you answer. Nikesh: “Mobile growing by leaps and bounds.” “So yes, we are seeing tremendous usage, and we also saw uptick during holidays,” when people were looking for stuff.

Q: So is CPC decline because more people went through mobile?
A: Nikesh: Susan, you answer that. Susan: Two biggest factors were FX and changes we’ve made, which increase paid clicks — better for everyone — but those clicks may have a lower cost.

Q: What’s in that $5B display number? Same as the $2.5B number from October 2010?
A: Pichette: Yep — take out text, count mobile, count YouTube. Apples to apples.

Q: How did Europe affect numbers? Also, can you give us a sense of “blended TAC rate” for that $5B?
A: Not talking about $5B breakout. On the economy: “Quite a solid Q4 performance.” Separate from FX issues, Europe was “quite healthy, despite the environment.”

Q: YouTube. Can you give us a little more insight there? Are you seeing signs that TV ad budgets are coming to YouTube? Where are YouTube monies coming from?

A: Pichette: “YouTube is doing absolutely terrific.” Larry on YouTube ads: “Tremendously excited about our growth … but it’s not significant compared to the overall video space.” TV advertisers not thinking about it. (Which is the point of the channel strategy.)

Missed Q on Android. Here’s Larry Page’s answer: Early stages of monetization. We do make money on it via ads, and some people are buying apps, too (most downloads are free). “I’m very, very optimistic.”

5:06 pm: Q: More on CPC being down. Question involves “rank order,” so my head hurts.
A: Pichette: Panda search changes will show up next Q. FX changes we can’t do anything about.

[Missed next exchange]

5:09 pm: Q: Another CPC question. Talk more about this, please. Also, your traffic acquisition costs are up. Why?
Pichette. TAC increase is “just a mix issue.” (Mobile mix or partner mix? “Yes,” says Pichette.)
Wojciki: Like I said, FX and changes we made to ad quality are the reason that CPC is down. This quarter, we made a lot of changes. Quarter before, we did a lot, too. Some Q3 changes show up in Q4. “But not any one big one — it was the sum of many other changes.”

Oh, Google earnings call. You are defeating my powers of concentration.

Q: Discussion of hedging program. “Is this working the way you want?” Also, CPC seems to be going the way you want, even though it costs you money. Please talk about that.
A: Pichette gives answer about hedging that is 100 percent jibberjabber to me, because I can barely master a checking account.

Larry Page on CPC: “I do think that CPCs do vary a fair amount, and we’re not surprised by that.” Some changes we make will push it up, others down. Not that big a deal.

Q: Are you happy with the results over the quarter? A: Larry: Like I said, yes.

Wojciki: Instead of focusing on CPC decline, you should note that paid clicks are up 34 percent.
Page: Can the next question not be about CPC?

Q: Nope, it’s a question about CPC.
A: Pichette: Overall, you’re seeing more clicking, and we’re getting a better overall result. If CPC goes down for some reason, “that’s just the nature of experimentation.”

Q: Google+ question for Larry. Please describe how G+ can increase engagement on all properties.
Larry: Engaging with users, really deeply; really, really important. G+ really important part of that effort. Notion of identity really important. With “other big companies that work on social data … we’ve seen a general data to wall that garden off.” We like to partner with third parties. “But in general, companies have been walling that data off,” and we’d love to use it. (Here I would like to see the facial expressions of Dick Costolo and Mark Zuckerberg.)

Q: Do you need more markets for e-commerce play? Thirty markets right now.
A: Wojciki. Yes, we’re good. We’ll expand, but we need to learn from the places we’re in right now.

Q: Last year, in Q4, you talked about big changes “on the quality side.” Talk about that. Also, you hired less people this Q than in other Qs. Trend?
A: We talked about it last year, because it was a big deal. As far as hiring, Larry already said we were growing very fast — Larry interrupts here: “The edge of what was manageable” — so now we’ve slowed.

Last Q: More on Google Wallet, please. Are you going to double down on that? Also on Motorola: Given $12.5B size, won’t that affect “growth and margin profile”? So please talk about mobile philosophy.

A: Wojcicki: Like Larry said, we’re focusing on core products that people use every day, and you use you wallet every day, so it’s a big deal for us. “Very excited about Wallet, and will continue to invest in it.”

Larry: We’ll break out Motorola so you can see the results separately from the rest of the business. We’ve been clear that we will run it as a separate business, and won’t favor it compared to other OEMS (again, so why keep it?). Shows our commitment to Android, and how we want to keep “our freedom to innovate” (Translation: We need those patents.)

Pichette: Remember, for Q1, lots of resets every year at this time. So you won’t be surprised at the end of the quarter.

Alrighty, we’re done. Thanks for sticking around.

Where before, Google had listed nine people as executive officers, now it only has six, cutting out Shona Brown, Alan Eustace, and Jonathan Rosenberg. What happened to those three? Long-time head of product management Rosenberg is leaving the company; Eustace is now head of “Knowledge,” a.k.a. search, on par with six other “core product area” SVPs; and Brown is now in charge of Google.org.

By the way, none of those changes have actually been announced by Google, though when asked, the company has confirmed they have indeed happened.

That leaves the following:

Larry Page, CEO
Eric E. Schmidt, Executive Chairman
Sergey Brin, co-founder
Nikesh Arora, Senior Vice President and Chief Business Officer
David C. Drummond, Senior Vice President, Corporate Development and Chief Legal Officer
Patrick Pichette, Senior Vice President and Chief Financial Officer

Sure, we’re obsessing about a single, mostly static Web page, but what makes these deletions more remarkable is that prior to a major clean-up last year, the management page had something like 70 people on it (here it is on the Wayback Machine).

Meanwhile, a related corporate timeline that diligently lists Google’s launches and other accomplishments hasn’t been updated since Sept. 2010.

But this seems to be the way of the new Larry Page regime: offering less information, not more.

Instead, Page jumped on and off the call within the span of two minutes, handing it over to a bevy of polite lieutenants who mostly referred to the press release and fended off financial analysts’ questions about why the company’s high costs are dragging down its profit.

It seemed like the perfect time for Page, whose ascension to CEO had been publicly and privately expected for a while, to set the stage for his new regime. But Page, who disdains the public eye, declined to meet those expectations.

CFO Patrick Pichette, asked by an analyst to comment on the Page changeover, replied, “In short, the company’s position has not changed. Google is a technology company focused on users and looking for products that can affect billions of people.”

Today, Google seemed passive and even disorganized. An earnings slideshow meant to support the call failed to load, and the call itself was conducted using RealPlayer and Windows Media instead of the more accessible (and Google-owned!) YouTube, which had been used in recent quarters.

And the company still hasn’t updated its management page, despite acknowledgment through news reports (including on this site) that internal responsibilities have significantly changed in the last two weeks.

In an exceedingly calm voice, Page said he is “very excited about Google and our momentum,” adding his new team has “really hit the ground running,” with the changeover from long-time CEO Eric Schmidt “working very well, exactly as we have planned.”

Then CFO and SVP Patrick Pichette took control, accompanied by SVP of Advertising Susan Wojcicki and SVP of Commerce and Local Jeff Huber, as well as SVP and Chief Business Officer Nikesh Arora piping up for the Q&A.

Wojcicki and Huber were recently promoted as part of Page’s inaugural management reorganization. The two have been invited to speak on earnings calls before, appearing on the line-up for the Q1 2010 call.

Earnings call regular Jonathan Rosenberg, who is leaving the company, did not participate.

Earnings call ringleader Pichette remains CFO, and Page expanded his role to include human resources and business operations.

But that was Google’s fate today: It spent most of its earnings call trying to convince investors not be worried about its earnings of $8.08 a share, which were lower than the $8.13 Wall Street was looking for. Which was really a discussion about Google’s spending.

You can catch some of the back-and-forth in my liveblog of the call at the bottom of this post. But the general gist was this:

• Random analyst: I see you’re spending a lot on people, or real estate, or whatever. Will that continue?
• CFO Patrick Pichette: Kind of. Because we’re growing really fast! But don’t worry, we think hard about every penny we spend.

Here’s what didn’t happen on the call: Any kind of interesting discussion with Larry Page, Google’s old/new CEO. Dummies like me thought the company’s new leader might want to spend some time reintroducing himself to Wall Street and the rest of the world, but that’s why we’re dummies and Larry  Page is Google’s CEO, apparently: He’s got better stuff to do.

Wall Street seems okay with this, for now: One analyst did try to ask Google if, you know, things might change in any way now that someone else was running the company. But Pichette told him that there was nothing to see here, and that he should move along, and that was that.

——————————–

Earlier:

Here’s a first look at Google’s Q1 results: Revenues of $6.54 billion and earnings of $8.08 per share

Wall Street was expecting net revenue of $6.32 billion and earnings of $8.13 per share.

It’s not immediately apparent where the miss comes from: Google delivered non-GAAP operating income of $3.23 billion, which is in line with what Wall Street was hoping for. Some investors aren’t waiting for anyone to figure it out, and are selling: GOOG is down 4 percent in after-hours trading.

Google did add nearly 2,000 employees in the first quarter, but it already warned Wall Street that it would be going on a hiring binge by adding more than 6,000 bodies this year.

And Google reminded us that it takes a lot of big, expensive equipment to run a company of this size: It spent $890 million on capex last quarter. “Thee majority of [that] was related to IT infrastructure investments, including data centers, servers, and networking equipment”, the company said in a release, adding that “we expect to continue to make significant capital expenditures.”

Here again is Citigroup analyst Mark Mahaney’s cheatsheet, so you can play along at home:

Google CEO Larry Page will run his first earnings call since he started his new/old gig at 1:30 pm Pacific; I’ll be live blogging then.

LIVEBLOG:

Hrm. Turns out Larry is only going to make a “cameo” at the beginning of today’s call.

He’s discussing management changes. “Everything we told you about last quarter has happened. It’s all working very well, and going as planned.”

Eric’s still working, and traveling, and so is Sergey.

Also, we’ve moved around our org chart.

I’m “very very optimistic about our future.” Also, I’d like to praise Jonathan Rosenberg, who is leaving.

I’m taking off now, but “you’re in very good hands with Patrick.”

Okay, Larry’s gone! Didn’t give the drama critics much to work with there.

So instead, here’s the lineup: CFO Patrick Pichette, as usual, sales boss Nikesh Arora, as usual. And two new faces: Jeff Huber, who runs local and commerce, and Susan Wojcicki, who runs ad products.

Rejoining Pichette’s introductory memo read now.

On to capex: A big chunk of those expenses went to buildings Google bought in Dublin and Paris.

Pichette bragging about product: Android, Chrome, display ads, mobile search. YouTube has developed into a “win-win” platform (for content-makers and watchers)

Okay, now on to Jeff and Susan.

Jeff Huber: Ambitious hiring was “by design,” just like we said it would be. “This is a very good time to invest.”

We look at our booming business and “say to ourselves, who wouldn’t want to invest in this business.”

Starting with search: Launched over 90 quality improvement this quarter. And yes, some sites lost revenue because of one of them. But it’s better for everyone in the long run

Improved social search. Have you seen our +1 button? “This is just the beginning. Lots more” social features coming soon.

Some Android stats. Missed the number of installs per day, but three billion app downloads last quarter.

Chrome: Has 120 million daily users, 40 percent of whom we added this year. Chrome OS going well. Launching on hardware later this year.

And here’s another shout out to Jonathan Rosenberg. “I can assure all of you that he will be missed.”

Here’s Susan Wojcicki: Start with search. Working on figuring out “how to serve the perfect ad with every query.” Which means new ad products.

Now she’s describing them. Better to show than tell, I think, on this stuff. Maybe there will be a link!

On to display. “Very proud” of DoubleClick. Google Display network up 5x since acquisition.

Wojcicki just used the word “bucketed.”

AdExchange volume has tripled in last year. Two-thirds of that being bought via real-time bidding (many ad tech buzz alert bells just went off).

Mobile: Booming. AdMob has over 150 million Android and iOS devices making requests every month.

Okely dokely. Back to Patrick. Much briefer than the Rosenberg-era speeches.

Actually, even better: On to Q&A. I like the Larry Page era!

Q: You’re spending a lot of traffic acquisition, and in general. Should we expect that to continue?

A: Pichette: Some of this is the result of the 10 percent raise we gave everyone. Plus everyone’s benefits get a boost in Q1 as well. And then we have all those new Googlers we just hired. So: Some of this is a one-time cost issue.

In other areas, marketing is up because returns are up. “We don’t expect to slow down our marketing” because it works for customer acquisition and for “key key products” like Chrome.

In other areas, we’re very very disciplined. People show up each quarter to justify their budgets.

Q: More questions about expenses. Also, what’s up with the slides we can’t get to work?

Pichette: We spent more on professional services because we’re spending on the geo product, and we also have a couple of other areas. We do have slightly more legal expenses, and our real estate expansion pushes those costs as well.
Also, here’s why we’re spending on Chrome. Two reasons: Tactical and strategic. When people adopt Chrome, they get to our services right away. (This seems like both answers. Got me.)

Q: Please talk about the way Larry views the company, and how we should think about the way it runs with him.

A: [Wouldn't it be awesome if Larry ran back to the phone to answer this question? No? Anyone? Isn't it weird not to have the CEO on an earnings call?]

Pichette: Nothing’s changed.

Q: Okay, but seriously: Any kind of change? Maybe with the financial model?

A: Pichette: Nope.

[Another question on expenses, which I missed. Apologies.]

[I have CNBC on mute, and I see that they've toted up Larry Page's total word count for the call: 370]

Q: Please talk about social data. How much do you have access to, and how it will affect search results.

A: Jeff Huber: It’s important, but it’s one of many signals we use.

Pichette: Let’s talk about +1 again. It’s very important. We’ll continue to focus on social.

Q: Does Chrome give you additional signals you can use?

A: Huber: Yes, there’s some info you can use via sign in.

Q: More on expenses and social, please.

A: Pichette: It looks like we’re spending a lot, but keep in mind that everyone has to justify their expenditures: Real estate, food, servers, whatever. “Google is growing 25 percent year over year. That’s $2 billion in revenue a year.”

Huber: Yup, still experimenting with social.

Pichette: I know you guys are hung up on expenses. But thanks for letting me talk about it.

Q: Can you talk about how Panda (big algo search change) has changed user behavior/metrics.

Huber: I’ll repeat the stats I talked about earlier in call.

Q: Also, overall display is growing. Are we going to see it from different ad units, or better targeting/data?

A: Wojcicki. We’re at point were you can buy audiences, with much more specific targeting, than in the past. That’s how we get better ads. Also important to note that our display strategy focused on end-to-end platform to enable all buying for all publishers. So that will move more money from offline to online, where users are going.

Q: Is tablet share as important to Google as smartphone share v. PCs?

A: Huber: Tablets growing well. Tablets have interesting properties, because they’re part mobile, part PC. Android has great products coming along, like Honeycomb, which you can see on the Xoom. You’ll see other products coming around. And in ads, advertisers can now target devices. [So, not really an answer]

Q: Now that you’re tying bonus checks to social, how will you measure success?

A: Pichette. Not really going to comment because it’s an internal matter. [sigh]

Q: Search is awesome. But growing concern that “enagagement” is a bigger theme that’s working for some competitors (cough, Facebook). Have you guys thought about pushing engagement more?

A: Pichette: Yes, engagement matters. But look at local, or mobile, or YouTube: All of these businesses are about engagement. So we build those, and we get more engagement. And search today is much more engaged than three years ago.

[Question about content and Chrome that I missed]

Q: On mobile: How much is a mobile user worth per year, and how can that grow over years? Also: What about other big-ticket purchases?

A: Huber: Of course we’re not going to comment on a dollar figure. That said, you can see we’re “very, very excited about” it.

And of course it’s going to become more important over time.

Q: Futile attempt to get you to quantify this in some way?

A: Wojcicki. “It’s going to grow a lot.”

Pichette: “Without any radical effort”–at least with Android. We already said this is a billion dollar annual business. “And we tripped into it. And it’s growing at an amazingly blazing pace….We tripped into a billion dollars.”

On big-ticket purchases: You hear about the stories about the deals we make, but not the ones we pass on. We look at them all the time, and if they make sense we would do it, but we haven’t found one yet. “Big acquisitions can be a massive distraction for Google.” Would have to pass double bar: Strategic/financial test, plus the don’t-screw-up-the-culture test

[Small business question I can't get to right now]

Q: Can you talk about non-search ad business, and how that’s growing? Also, “does Google have a video strategy for non-UGC?”

A: Pichette: We’ve made a number of additions to YouTube team that has a specific focus on that, but nothing to say about that.

Huber: That said, UGC has always been core to YouTube. “We are interested in long-form premium content in the longer term of YouTube.” Also, we bought those guys from Next New Networks!

Wojcicki: We are thinking about best way for advertisers to bid on stuff. In search, for instance, people can bid on cost-per-action target, and we can back that into a cost-per-click target. We can do same with cost-per-impresson.

Q: Can you talk about disruption from Japan. Also for Android, you talked about 350,000 installs per day: please break down between tablets and phones?

A: First reaction to Japan was to help the community rather than optimizing revenue. March results affected, obviously. Japan was important to us, and it continues to be a great-performing market. We asked Hal Varian to look into this, and “Japan is actually a first-world country, and they bounce back very fast.”

On Android: Huber. “Android is relatively early on with tablets.” Which is a non-answer that sounds like “it’s almost all phones” to me.

Q: You say that video inventory is important, but most inventory at YouTube still going adless. What’s up with that?

A: Arora: We care about monetizing all video, not just at YouTube. At YouTube, we do need help from the creative industry to figure out ads that work a bit better with targeting. “We’ve very happy with the progress we’ve been making” and we think ad dollars will move from TV to IP video delivery.

Wrap up from Pichette: Thanks Googlers. You’re great. Also, I want to praise Jonathan Rosenberg, again. He’s on vacation right now. But he’s legendary. And we think he’s great.

OK, we’re done!

Until now, business operations has been managed by Shona Brown, who had also once run “People Operations,” as human resources is called at Google.

More recently, HR has been run by VP Laszlo Bock, who initially reported to Brown and later directly to former CEO Eric Schmidt.

He will now report to Pichette, sources said.

Brown will narrow her duties to leading Google’s philanthropic efforts, via Google.org. She takes over from new business development VP Megan Smith (please see disclosure below), who has run “Dot Org” on an interim basis as its general manager since the departure of its initial high-profile Executive Director Larry Brilliant in 2009.

Google declined to comment on personnel matters.

Brown has been with Google since 2003 (which was well after Larry 1.0; Eric Schmidt became CEO in 2001). Here’s how my colleague John Paczkowski described her role last week:

Before she came to Google, Brown spent a decade consulting for McKinsey and is widely credited with optimizing Google’s internal structure.

But Page is not a McKinsey guy and he’s obviously not a big fan of Google’s current management organization anymore.

That might not bode well for the legendarily sharp-elbowed Brown who most sources describe as highly strategic but also as extremely difficult to work with.

Still, if Page is tinkering with the way Google is organized, Brown might also be the one he turns to to find a new structure.

That said, he seems to be fine doing it on his own and some suggest Brown will move to another role within the company rather than leaving.

Not all agree.

Said one source: “I wouldn’t be shocked to see Shona go. Frankly, I’m surprised she survived as long as she did, but then I didn’t think Rosenberg would last this long either.”

But, said another about Brown, who has previously taken time off from Google and returned: “I’d never count Shona out.”

Page’s big reorg aims to make the 12-year-old company he co-founded faster and more innovative to fend off the stagnation of middle age. The first step was removing long-time product chief Jonathan Rosenberg, followed by the elevation of seven long-time product leaders to senior vice president of their respective domains: Sundar Pichai (Chrome), Vic Gundotra (social), Andy Rubin (mobile), Salar Kamangar (YouTube), Alan Eustace (search), Susan Wojcicki (ads) and Jeff Huber (local and commerce).

And as for the newest big winner, Patrick Pichette? Unlike many of the others in Page’s inner circle, Pichette is a more recent Googler. After spending seven years at Bell Canada, Pichette replaced the retiring George Reyes in 2008.

Pichette has been a regular presence on Google quarterly earnings calls, the next of which is this Thursday at 1:30 PT. While whatever Google did in the first quarter of 2011 was surely interesting, the call should be the first public comment on the new Page regime. It will be a big test for Page, who notoriously loathes the public eye.

Meanwhile, Google’s management bio page should be sent packing to the Internet Archive any day now.

While it’s only a week out of date–my, how things have changed.

(Full disclosure: Smith is married to All Things Digital Co-Executive Editor Kara Swisher.)

In a regulatory filing Friday with the Securities and Exchange Commission, Google said Chief Financial Officer Patrick Pichette received a $2.7 million bonus and equity valued at $15 million under the company’s executive bonus plan in recognition of his contributions to Google’s financial performance last year.

Read the rest of this post on the original site »

No big deal, Google said–just a little re-org.

And at first blush, Wall Street seemed to take the company at its word. Eric Schmidt, Larry Page, whatever. A sampling of analyst reactions:

• J.P. Morgan’s Imran Khan: “We think it is important to note that although the titles have changed, the core team remains the same. We think this new team structure makes a lot of sense and could result in faster decision making.”
• Citigroup’s Mark Mahaney: “We view this change as un-dramatic, as Eric Schmidt will still be working closely with Page and Brin…we believe Larry Page has been groomed for the role of CEO, and we don’t expect any dramatic changes to Google’s core strategies.
• Barclays’ Douglas Anmuth: “We don’t actually view it as that material of a change. We still think Google will be run in a similar manner as it is today, and mostly by the same people.”

Investors also seemed to yawn, or at least they seemed to last night: Google stock moved up a little bit after the market closed, but that was it.

Today, though, the story is harder to discern from the GOOG chart, which is one of the reasons you should always be wary when someone tells you with confidence why a stock is moving one way or another.

Watch the huge spike at this morning’s open, and then the steady decline. This was taken shortly before noon, New York time:

Again, don’t make too much of a stock’s movement on any given day. But you do have to wonder if any of this reflects a reassessment of the move.

It is definitely true that Larry Page was deeply involved in every major decision Google grappled with, and it’s undeniable that the company relies on a second tier of executives, like CFO Patrick Pichette and sales boss Nikesh Arora, to make the trains run on time. So, easy enough to argue that there’s no real change.

Still, now we’re seeing reports reminding us that the weird power-sharing arrangement between Schmidt, Page and co-founder Sergey Brin was, in fact, a weird arrangement. And that it didn’t always work smoothly. And that the three men may not have been on the same page about a variety of things. Which means that the company may in fact behave differently under Page’s guidance.

Which again, isn’t necessarily a bad thing. But it could be a new thing–and Wall Street never quite knows what to make of that.

But pressed to talk about some of the company’s non-search businesses, Chief Financial Officer Patrick Pichette did allow that YouTube’s revenues “more than doubled” last year.

That’s good to know! But also not a shock. Last quarter, when the company offered up a smattering of numbers to appease inquiring minds, it told us it had doubled the number of video views it was monetizing, to two billion a week.

So the real surprise would have been if YouTube revenues hadn’t doubled in the last year.

Meanwhile, trying to figure out the true size, and value, of YouTube remains a guessing game for the best-intentioned observers.

Citigroup’s Mark Mahaney, for instance, thinks YouTube’s gross revenue is on a $1 billion run rate, but figures that number could grow by as much as 50 percent this year. Barclays’ Doug Anmuth, though, offers up a slightly more modest estimate of $1 billion + for 2011.

Profits? Who knows.

One pretty safe guess: Google won’t be giving us real YouTube numbers we can chew on for quite some time.

Here are the three data points that the search giant showed off during its earnings call this afternoon. All of them “begin with the letter B,” as product SVP Google Jonathan Rosenberg noted, and all of them come with caveats:

• $2.5 billion: Non-text display ad revenue run rate. That number includes ads from its DoubleClick unit as well as YouTube.
• 2 billion: YouTube monetized views per week.
• $1 billion: Mobile annualized revenue run rate.

All of those seem big–and they are! But they’re also deliberately fuzzy enough that it’s hard to tell exactly what they mean.

For instance: As Henry Blodget notes, those display-ad dollars are gross revenue, which means that Google only keeps a portion of them. And while that two billion YouTube views number is up from a billion a year ago, it’s proportionally the same: A year ago YouTube said it was monetizing a billion views a week while serving up a billion views a day; now the video site says two billion views a week and two billion a day.

Meanwhile Google officials, who routinely announce that YouTube is close to profitability, refused to tell analysts whether YouTube is actually profitable.

No matter! The point of b-as-in-big numbers was to impress Wall Street with Google’s ability to create new revenue streams beyond its core search ads. And the data, along with the company’s impressive Q3 performance, seems to have worked: Shares are up nine percent in after-hours trading.

——————

EARLIER

There’s the beat Wall Street was looking for. Google reports earnings of $7.67 a share and net revenues of $5.48 billion. The consensus was for $6.67 and $5.25 billion. GAAP EPS was $6.72.

Google (GOOG) has been plowing money into capital expenditures and people–it now has 23,300 employees, up from 21,800  months ago, a 6.8 percent increase–but it has been able to keep operating income quite healthy, anyway. Adjusted operating income was $2.93 billion, well above the $2.77 billion consensus.

GOOG is up considerably, now seven percent, in after-hours trading. Robot cars for all!

You can listen to (and watch) Google’s 4:30 pm ET earnings call by clicking on this YouTube link. I’ll add updates from the earnings call occasionally starting here:

As in recent quarters, CEO Eric Schmidt is sitting this one out.

CFO Patrick Pichette starts off. Aha! Teases that “we may have” Schmidt available for the first 30 minutes of Q&A before he gets on a GooglePlane.

300 of those new 1,500 employees came from acquisitions.

Discussion of “long-term” growth–”the next 5 to 10 years.” “Simply put, we’re on this growth agenda at full throttle…investing heavily in people and in product.”

There’s a “war for talent” in our industry, which is “out of synch” with the broader economy. Currently exploring how to attract and retain people. Winners and losers determined by this battle.

Re: Product investment, which you’ll hear about from product SVP Jonathan Rosenberg. He’s going to tell you about some numbers, but don’t expect to hear an update on these–they’re merely “proof points” about Google’s success.

Here’s Rosenberg, teasing new previously unreleased numbers.

Here they come. Starting with search and Google Instant:

Impact has been “very minimal” on revenue and “quite expensive” from a resource perspective.

But! “We launched it because we could.”

As search gets better, ads have to keep pace. Great momentum with AdWords.

New ad formats appear on more than 10 percent of query. Some formats show clickthrough rates as much as 10 percent on some, up 30 percent in others.

Big numbers, “which all begin with the letter B.”

$2.5 billion: Non-text display ad revenue run rate. That includes DoubleClick, YouTube.

2 billion: YouTube monetized views per week

$1 billion: Mobile annualized run rate

Mobile search queries up 5 times in the last few years.

Back to Pichette, to tamp down numbers.

In some cases, there is overlap with numbers. For instance, with AdMob, numbers counted in both display and mobile.

Time for Q&A, Schmidt is now on the line.

Schmidt says query growth is pushing click growth, and so are new ad formats. Ads are more compelling, etc.

Pichette notes that AdX numbers are included in the $2.5B display total.

Q: Please talk about YouTube. Of the two billion monetized views, what percent is that of total views? And are you profitable yet?

Pichette: Re: Profitability, “We have not made any comments on it.” [Except of course when they do, over and over.]

Rosenberg: Note that we’ve said we do two billion views per day–that will give you context.

Sorry, missed a Q.

Schmidt says growth of Android is “well past what I had ever hoped for.”

90,000 apps on Android “and growing very fast.”

Question about “proprietary benefits” of Android.

Schmidt: Android is the “largest single platform play” in mobile today.

We’re growing it by giving software away. How does that help us? Well, for starters, people who use Android search two times more than anyone else. Obvious benefit for us there, and search is more lucrative for us there as well, and that makes Android “hugely profitable.”

And we can add other value-added services to Android, but that’s not the focus right now.

Questions on cost: Cost per employee has declined. Can you continue that? And on mobile, will you stay with the “indirect monetization” Android strategy?

Pichette: Wouldn’t read anything into the cost-per-employee numbers. But we’re continuing to be frugal and generous.

Ad boss Nikesh Arora: We’re excited about the revenue model we have. We have no reason to change the model we have with Android.

Schmidt: And display will become a very big component of mobile.

Q: On display, can you break out YouTube and AdX numbers? And what do you think of competitive Android marketplaces?

Pichette: No breakout of numbers. [Duh.]

Schmidt: Goal of the app store is to make money for developers. Not a revenue goal for Google. More stores are a “win for everybody.”

Question about CPC on mobile devices. Rosenberg: They’re lower than desktop, because there aren’t many practical ways to consumate transaction. But on the iPad, activity looks a little bit more like it does on a PC, because there’s more room to enter credit card numbers, etc.

Q: Please discuss cannibalization between smartphone and PC–are iPad and tablet searches incremental or cannibalization? And can you give us color on international 26 percent growth?

Rosenberg: We don’t see cannibalization. We see mobile as complimentary to desktop. Different use patterns–mobile search is on weekends, during lunchtime, etc.

Arora: Generally, trend positive across the board. U.K. a bit weaker, but some of that is FX. Southern Europe way better than Northern. Asian markets robust.

Q: Competitors make $300 profit per handset sold over the lifetime of a device.You’re approaching this with a different model, but do you think that’s an upper limit on that number?

Schmidt: Our model is that handset makers and manufacturers make a lot of money from the phone, and we make money from advertising. So can’t compare the two, and premature for us to guess what we can do. “It should be highly lucrative” and a “very very strong revenue stream compared to a PC.”

Q: On social search. How do you “capture the signal” without access to the data feeds, as you have with Twitter.

Schmidt: “There are some ways we can do that” now, and we’re working on new ways.

Sorry, stepped out. Back now.

Q: TAC rate seems to be lowest since IPO. Sustainable? Growth has been driven by volume, not price. Sustainable, and/or will pricing increase going forward?

Pichette: MySpace deal is now over. That saved us a bunch of money. And mix of our partners will effect our TAC. That’s about it.

Rosenberg: Can’t answer volume/price question without “being forward-looking.” [Heh]

Q: Microsoft/Facebook deal was exclusive. But do you think you’ll see exclusive data deals? And what about Groupon, etc.? Can you compete there?

A: Value of exclusive data is “swamped” by “vastness” of the Web. So no concern there.

Schmidt: Always a concern that large chunks of data are not accessible to search engines….long pause… up to the content owner to decide how much to expose. We believe the world is better off if more information is searchable. “We fundamentally believe that.”

Rosenberg: Daily deals are very exciting. “A lot of small companies doing a fabulous job there.” We participate a little bit via sitelinks. But no question “that’s a very exciting and hot space.”

Q: When will Google Instant be on the BlackBerry or iPhone? What’s Android activation rate? And why not let advertisers bid directly on mobile inventory?

Rosenberg: Instant availability on other platforms “relatively soon”–probably this fall.

Not updating Android activation numbers.

Q: Given that non-core search is more material, do you think you’ll keep allocating resources with your 70-10-10 model? And when do you anticipate mobile overtaking desktop?

Schmidt: On mobile vs. display: Even if we knew I don’t think we’d talk about it.

On core vs. emergent: We talk about this all the time. Depends. Android is very small, and growing fast, so they get all the resources they need. We end up still at 70-10-10, but that’s not really a formula for us.

Pichette: What really matters the most to us is as Eric says, “When you see a hockey stick, pour gasoline on that fire.”

Q: Big-picture data question: What does Google think about leveraging user data to better target ads (see Facebook, Yahoo, etc.)–particularly with search data and display?

Schmidt: “We have a pretty strong opinion that we’re not going to do very much of it.” We’re intensely serious about privacy.

So “we’re not going to do the kinds of things that we could do with it… without your explicit permission. And in many cases we probably won’t do it forever.”

A question on display, which I’ve missed but will have to return to.

Pichette wraps things up. Today’s data points “are not about giving you information” for coming quarters, but to give you confidence that we’re building long-term businesses.

Call ends.

Mark Mahaney’s cheat sheet will help you decipher the numbers:

Then they say that YouTube is very close to becoming profitable.

That’s what CFO Patrick Pichette said in July 2009. And that’s what sales boss Nikesh Arora said in July of this year. And that’s what CEO Eric Schmidt said today, according to Dow Jones Newswires:

“YouTube is ‘nearing profitability and its revenue is doing quite well,’ Schmidt told journalists at the sidelines of a conference at the French university SciencesPo. ‘It looks like it’s going to be very successful,’ he said.”

Okay. So does anyone want to guess when, if ever, Google will tell us that YouTube is actually profitable?

BoomTown liveblogged Google’s earnings call this afternoon.

Earlier today, Google (GOOG) beat Wall Street’s expectations in its first-quarter earnings, signaling that online advertising spending is back on track.

Here we go:

1:30 pm PT: Investor lady went over investor stuff. Zzzz.

1:33 pm: First up: Patrick Pichette, CFO of Google, whose delightful French accent livened up what was an almost entirely newsless event.

In fact, it turned out that the biggest news was changes in how Google presents its earnings calls going forward: No more CEO Eric Schmidt!

Instead, it will be Pichette from here on out, along with sidekick and head products dude Jonathan Rosenberg. Who was not around today, so top Google execs Susan Wojcicki and Jeff Huber filled in.

Also making an appearance, Nikesh Arora, president of Global Sales Operations and Business Development.

Thus, a parade of Google execs replaced Schmidt–all of whom said as little as he used to!

Pichette went through the numbers–lots and lots of them.

“Very strong performance, across the board, in terms of revenue,” he concluded.

1:44 pm: Next up, Wojcicki–fun fact about the VP of Product Management: Google was started in her garage–talking about improvements to ad search results.

They are going to get fat and detailed, apparently, with all kinds of stuff attached to them.

“The idea is for them to be more useful and therefore more high performing,” she said.

In display, Wojcicki said there was “very strong momentum.” More DoubleClick integration, more analytics.

Mobile: “Doing very well.” (I look forward to the first analyst question about its regulatory approval problem with Google’s $750 million AdMob acquisition.)

There will be an ability to “call through” on ads in smartphones, which sounds kind of cool.

1:51 pm: Next, it was Huber’s turn. He is SVP of Engineering.

He started with mobile and geolocation features Google is working on, some of which sounded a bit stalkerish. To the all-seeing eye of Google, they are fabulous, of course.

Its Android and Chrome operating systems are growing, Huber said, noting that there are now 34 Android devices.

Take that, Apple!–which has but one (which is doing pretty well on its own, Huber declined to add).

1:55 pm: Arora joined the call with the others for Q&A.

Questions about international advertising. All was well, said both Pichette and Arora.

Next question was about the percentage of revenue from enterprise and mobile. Also what up with Nexus One?

Pichette was not saying, of course, as that information would be useful.

Also no data on the profits of Nexus one, which Pichette noted was indeed profitable. But Google wasn’t saying how much! More non-news.

Finally, a good question about whether Google will remain on Apple (AAPL) products–given growing corporate rivalry between the two–and why the heck Schmidt is not on the call anymore and whether there is more to it.

Pichette became slightly agitated about the CEO question.

Eric has been everywhere! Abu Dhabi! Washington, D.C.! Jetting around on the GooglePlane like it was nobody’s business!

“It does not mean that Eric is not available,” said Pichette, explaining that the move is simply a question of “streamlining.”

Huber declined to comment about Apple, of course!

But, blood in the water: What’s up with Facebook competition?

This is a true oucher for Google internally, with execs quite concerned about the social networking site’s growth, even if Huber did not admit it and called it “not a significant issue.”

Translation: It’s significant.

2:04 pm Back to the sleepy questions on marketing and how the company feels about upcoming quarters compared with previous ones.

Hey, the colorful letters of Google and Googley goodness are just not cutting it anymore! You need some pretty ads! You have to promote! After all, Google has actual products now, like the Nexus One.

The next questions were on the number of Nexus One phones sold and, finally, on China.

Huber was not disclosing! If there were a badillion devices sold, you know he would, of course.

Pichette took the China question.

“This was a tough situation, but we really think we made the right decision,” he said, noting that the company is kind of still in China from Hong Kong.

Well, not really, but it was the right decision.

2:10 pm: Another good question on the News Corp. (NWS) deal and the AdMob situation.

Pichette pointed out the the mobile ad market is “nascent,” naturally noting that Apple announced its recently announced iAd network.

In other words, let’s keep pointing to what Apple is up to to save our bacon with the government.

“Google wants every partner,” said Pichette about renewing the deal over MySpace, but added that economics have changed since the first one was done with the then-hot-and-now-not social networking site.

Translation: Don’t expect a big check, Rupert Murdoch!

More in-the-weeds questions, which provided some insight, but not much.

2:28 pm: Another China question about whether serving its results from Hong Kong is sustainable.

Yes, said Pichette.

More about search advertising innovations and targeting. Google is all over it, said Wojcicki in many, many, many more words.

This line of questioning continued until someone asked whether the reported tensions between Schmidt and co-founder Sergey Brin over China are behind his absence.

Juicy, but completely ridonkulous.

“Non,” laughed Pichette, answering in a jaunty way.

The lack of Schmidt, he added, was not a negative, but part of a review of stuff Google could do better. In fact, it was an innovation!

Mais oui or mais non, it was the most interesting news of the day.

Google beat Wall Street expectations in its first-quarter earnings, signaling that online advertising spending is back on track.

The search giant said net revenue–which excludes traffic-acquisition costs paid to partners–rose to $5.06 billion. Earnings per share rose in the first quarter of 2010 to $6.76, compared with $5.16 in the first quarter of 2009.

Net income climbed to $1.96 billion, or $6.06 a share, from $1.42 billion, or $4.49 a share in the same period last year, which was a 38 percent increase. Wall Street was expecting it to rise 30 percent.

It was a solid quarter for Google (GOOG), although not a barn burner, because investors expected it to do better than consensus.

Thus, Google’s stock price was down in after-hours trading about 3.5 percent to $575.84.

Encouragingly, paid clicks were up 15 percent, while revenue per click grew seven percent.

And as usual, Google was a money gusher, with $27 billion now in the kitty, giving the company the ability to buy whatever it likes.

“Google performed very well in the first quarter, with 23 percent year over year revenue growth driven by strength across all major verticals and geographies,” said Patrick Pichette, CFO of Google, in a statement. “Going forward, we remain committed to heavy investment in innovation–both to spur future growth in our core and emerging businesses as well as to help build the future of the open web.”

BoomTown liveblogged the earnings call, which began at 1:30 pm PT.

Google execs, well known for saying little, are unlikely to say much about the following: Its fight with China, its fight with Apple (AAPL) in the smartphone arena and more, and its possible fight with regulators over the mobile ad market related to its AdMob acquisition.

Here is Google’s slideshow about the first quarter:

And here is the official press release:

2010Q1_earnings_google

Please see this disclosure related to me and Google.

The rest of it is self-explanatory. But if you don’t want to read, you can go check out this sample video I’ve queued up for you.

Note that this doesn’t work on all of YouTube’s videos. And I can’t figure out how to make it embeddable. Enjoy.

Google (GOOG) stock has lurched five percent lower in the first few minutes of after-hours trading, as investors digest the news. If you want to anthropomorphize the market, you might speculate that it’s bummed that CEO Eric Schmidt and company didn’t show a higher revenue lift. But if you’re keeping track, revenue is up 17 percent compared with last year, and up 12 percent from the previous quarter.

Here is Citigroup (C) analyst Mark Mahaney’s “cheatsheet” for those playing at home (click to enlarge):

And you can see the company’s profit and loss and balance sheet here.

Google will be using YouTube to livestream its earnings call, but I’ll be providing some annotation here starting at 4:30 pm Eastern. You can also check out the company’s accompanying slide presentation here, and here’s a chart it’s particularly proud of (click to enlarge):

I’m trying out a promising new liveblog tool, but please bear with me if there are bumps along the way.

On the call: CEO Eric Schmidt, CFO Patrick Pichette, product guy Jonathan Rosenberg, sales boss Nikesh Arora. No Larry or Sergey.

Schmidt declares that he’s very pleased with Q4: “An extraordinary end to a roller coaster year.”

Schmidt: Clearly, we were right to start ramping up investments and will continue to do so. We’re investing in people and investing in tech based on our “70/20/10″ rule: 70 percent in core products, 20 percent in new business like mobile/Android, and 10 percent in “long view” initiatives like commerce and social.

And of course, more mergers and acquisitions. We’re continuing on a pace of roughly one M&A per month, some small, some big.

Pichette runs through the numbers in the release above. He reiterates Schmidt’s line about continuing investments.

Jonathan Rosenberg has a cold, but gets his message across: “We made some very hard decisions” to shut down some products to focus on winners. It’s our “more wood behind fewer arrows approach.” We’re focusing on DoubleClick integration, Android expansion and the Chrome OS. “YouTube, is in fact, monetizing well,” and we hope our partners make money, too.

Obviously, going forward, we’re going to plow resources into search. But other stuff too. Social, for instance. Not just social networking, but all of our products should be “social.” This can apply to search, local search, etc. We’re also focusing on commerce, whether people are making their purchases online or offline.

More Rosenberg: Mobile is important, and so is moving enterprise to the cloud.

Arora: We improved throughout the year, and Q4 was strong. Large companies like Staples (SPLS) and Volvo are directing an increasing portion of spending online [as they're supposed to do].

Arora: Search ads are always a value in December! Costs go up but they get more effective because people buy more.

Arora: Brand marketers are increasing their spending too. YouTube has had many successful brand campaigns. Have you seen Fox’s “Avatar” ads? They’re great. Other shoutouts for Sony (SNE) and American Express (AXP).

Arora: Most of the top networks have signed onto AdX ad exchange since we launched it in the fall.

Time for Q&A.

Google’s U.S. revenue had a big jump, but international revenue did not accelerate as quickly. What gives?

Arora: In the U.S., we saw large advertisers shifting offline to online. Other markets have different issues; hence, the different growth rates.

Are we back to normal in regard to seasonal patterns? Also, can you talk about “materiality” of mobile?

Pichette: We won’t talk about mobile revenue in any concrete way.

Arora: There is some different performance by vertical. Finance, obviously, isn’t as strong as it used to be.

Another question about mobile: Is Google trying to push revenue? Profitability? Also, please talk about China.

Rosenberg: Advertisers are starting to figure out what works on mobile. For instance, adding a phone number or an offer for mobile helps a lot.

Pichette: Regarding mobile, we want to drive innovation that in turn drives people to the Web, which is better for us. That’s the core engine of mobile.

Schmidt: “China stuff has been well-covered in the press,” the CEO notes before recounting the China story. “We’re in conversations with the Chinese government,” and our business has remained unchanged. “But in a reasonably short time, we’ll be making some changes there.” That said, we’d still like to be in China.

Missed a question. Apologies.

Please talk about outperformance of network business vs. owned and operated. Also, what accounts for higher marketing costs?

Pichette: Nothing to talk about re: network versus O&O. Re expenses, we said we were going to ramp up investment and we put in more there because we can track the results and the return on investment.

Arora: Yep, some of that money was to support consumer launches.

You said search increased five times on mobile. So what does that mean for revenue per search? Also, please talk more about increased spending on marketing.

Pichette: We’re really pleased with the marketing experiments we’re running.

Rosenberg: Regarding mobile, the new formats, targeting tools and reporting we’re giving mobile advertisers is making a huge difference. But I won’t answer your question about revenue.

Missed another question here.

YouTube monetization: Can you give us some metrics on how much inventory you’re selling?

Arora: Nope. But it has “gone from being a nice-to-have” to essential.

Pichette: The Youtube homepage nearly sold out in Q4. Hope that’s useful.

Can you break out ad spending by advertiser size?

Arora: Large advertisers are moving online, which is good. Retail was strong in Q4. We’re working with smaller advertisers to “bring them into the fray.” But the discrepancy so far has been mainly seasonal.

Can you rank your core businesses in terms of growth potential? Also, what’s up with you and Apple (AAPL)?

Schmidt: We’ve been saying for a while that display is a big opportunity. One story you haven’t seen so far is how successful we’ve been in display, but that will come out in 2010. [Note to PR staff: Start pitching!]

And obviously, mobile is small now but will grow quickly.

“With respect to Apple, it’s probably better to say”…that as a former board member “I have a special spot for Apple in my heart.” They’re a very well run company and “they have some very good stuff coming” strong competitor, etc.

Schmidt on Nexus One: What it is really about is a new way of buying a phone. Nexus One itself is the first in a series of examples where you can buy the phone online and pick your carrier.

Is Bing having an impact on cost per click?

Rosenberg: We think out CPCs are generally not affected by competitors. Prices are set by buyers.

Can you talk about Nexus One’s impact on margin?

Pichette. Not really. We want to innovate, etc. Nexus One will have its own margin and that’s how we’re focused on building the business.

We’ve seen third-party data on mobile projecting that iPhone could account for 50 percent of mobile traffic. Does that make sense to you? Also, you have said that the Apple relationship is “stable.” So what are the odds that you’re going to continue to provide search on the iPhone?

Schmidt: We won’t talk about the market share of Apple. And we won’t “speculate about any deals of any kind–true, not true, rumored, not rumored.”

Given that new display products are so great, is there any notion that people are moving dollars from search to display?

Schmidt: Advertisers “don’t shift, they add.” They might maximize search to maximize revenue and they might spend on display for long-term growth, branding, etc.

Pichette thanks Googlers listening for all their hard work. There’s an auxilary call at 6 pm Eastern with Pichette and Rosenberg, but I won’t be able to cover that one.

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.

Instead, Google CEO Eric Schmidt said today, you ought to be happy to work at Google…because it’s Google. In that sense, Schmidt said, the recession of the past year has been good for the company since it has highlighted the difference between working at his company and other options–including not working at all.

Schmidt’s comments came during a press conference he and Sergey Brin held today, which was wide-ranging and went down several interesting avenues. I’m reproducing a long chunk of it here from my recording of the chat, because I think it addresses one of the core challenges Google (GOOG) has: How to keep the innovative energy and intelligence the company had from its garage start-up days now that it’s a 20,000-person monster.

Google has been grappling with this for quite some time, but the challenge became more evident in the last year or so as the company began cutting back on perks like free food and low-cost child care, and even made its first-ever layoffs. (The photo at the top of this post is from the 2008 version of the company’s annual “Google Dance,” which was canceled this year).

Those moves were made in response to the economy, but they also did double duty by helping the company “reset the culture,” Brin said.

The exchange kicked off when a reporter asked the duo about a sense of entitlement among Google staff, in reference to a passage in Ken Auletta’s new book about the company.

Brin: I do think there was a period of time where the culture, as it were, was misinterpreted. I certainly remember when we would start, when there were a  few of us working in the garage, and occasionally [co-founder] Larry [Page] would rollerblade in with a few sandwiches for food. And that grew up into everybody’s expectation: “Oh, they should have all the gourmet food they want, at any time.”

I think it’s important to reset the culture from time to time. And I think several years ago we did that. Clearly, people had extrapolated from our past practices what the vision might be. And having actually been there, and knowing the rationale…we decided to, for example, we significantly cut down all the snacks that had been available. [laughter]

[The question is reframed: Isn't the real perk at Google supposed to be stock options, and aren't those much less valuable, now that the company's go-go growth days are over?]

Brin: Well, I don’t know. it depends on where in the graph you look. Certainly it has fluctuated ever since we’ve gone public. Up and down, so…

Schmidt: Let’s say this: It is axiomatic that the best thing to do is to found a multibillion-dollar corporation with free stock, take it public and have the difference between zero and the stock price….That would be the maximum gain possible. For most people, they don’t have the wherewithal and the skills to do that.

Brin: Or the luck.

Schmidt: And luck. Yes, I suppose. In your case, I think, skill and brilliance. People make decisions….The way to state this is that Google pays very well. Google is clearly a growth company, by any metric. And people at Google don’t work for those reasons at Google. We don’t want them to come to Google for those reasons. We want them to come to Google to change the world.

Life is short. And everybody here understands that. Life is short; you should work on the things that are most important. If you want to work on what Google is working on–cloud computing, search, all the things that we talk about all the time–then come to Google and we will pay you well.

That works. We don’t want a different workforce than the one that I just described.

And I would also answer the entitlement question, as I understood your question, as to say that the last year has been very good at solving that problem.

The tightening that [CFO] Patrick [Pichette] in particular did, who I think is the current Google hero, really did change the culture in a much more pragmatic way: “We’re happy to work here. We’re happy to be employed. We love what we’re doing. Our friends, you know, have been laid off.” It’s been a maturing process. And I think a generally good one.

[Image credit: permanently scatterbrained]

Schmidt added a bit of nuance to that message today, noting that the company had been surprised to see its European business bounce back as quickly as it has. Here’s my transcript of his opening statement.

We are clearly seeing aspects of recovery, and what is notable is that we’re seeing aspects of recovery not just in the United States but in Europe. I had been in error in assuming that there would be a lag, that it would the U.S. first and Europe second. Asia, of course, was never significantly hit in the first place.

So that means from a Google perspective that…we never stopped hiring, but we told our team internally and again, we’ve said to many other people that we are increasing our hiring rate and our investment rate in anticipation of a recovery.

Schmidt and Google co-founder Sergey Brin covered a lot of ground in the hour-plus press conference, and I’ll try to go back and break out out some of the other highlights. A few items worth noting in summary:

• Brin expressed contrition over recent Gmail outages and said the company was working both to prevent future failures and to react more quickly if and when they do happen. But he reiterated the argument, common among cloud-computing fans, that conventional email systems fail much more frequently.
• Schmidt repeatedly defended the proposed settlement Google had reached with authors and publishers regarding its book archive. Recurring theme: It’s not a perfect settlement, but it’s workable.
• Schmidt stressed the importance of porting Google’s Chrome browser to Apple’s Mac platform and said this would happen within months.
• Schmidt said Google was working on ways to help publishers sell their work on the Web (via one-offs or subscription). But he said he had no interest in promoting one publisher’s results over another, as Associated Press officials had recently suggested: “We have to be very very careful not to favor one media organization over another, with regard to speed or latency.”
• Schmidt, who’d previously noted that he expected Google to start making an acquisition per month, said that these would likely be small, five-to-ten-person companies. He added that it was unlikely the company would be in the market for something the size of a YouTube acquisition, which cost Google $1.65 billion. Translation: Don’t expect us to pony up billions for Twitter.

Earlier: My live coverage of the press conference:

Google (GOOG) co-founder Sergey Brin is sitting down with about a dozen reporters in Google’s New York City headquarters for a Q&A session. Tune in for live coverage. This should be a wide-ranging conversation, which I’ll attempt to cover live as well as I can. Please consider everything below to be a paraphrase unless it’s in quotes.

Brin is joined by Google CEO Eric Schmidt. Brin gives an unofficial intro.

Schmidt adds his own informal introduction.

Schmidt: We’re here because we have a global sales meeting in New York, and we’re winding that up right now. A series of internal talks, and the mood was “very, very positive.” We told them that “the worst is behind us” (which Schmidt has said before). We’re seeing recovery not just in the U.S., but in Europe as well. I had been in error in thinking it would be U.S. first, then Europe second. Asia is less important, obviously. We’re increasing our hiring rate and investment rate in an anticipation of a recovery.

Brin discusses some tweaks to search. Do you feel that Microsoft’s innovations with Bing will cause you to accelerate your innovations?

Brin: Competition is healthy. Microsoft (MSFT) has made its contributions. So has Cuill. Many of the tweaks in Bing we’d already seen from Microsoft Live earlier in the year.

Schmidt: I agree!

But do you think Bing is really different? Or just a rebranding.

Brin: [Demurs]

Schmidt: You guys should judge us and our competitors. We’ve been criticized for having a self-referential view of the world. But I’d argue that our success so far proves that’s been a good strategy.

Please talk about Android and other mobile plans.

Brin: We started with Android because it was a problem for us, as an end-user and a developer, that phones lacked powerful browsers and the ability to install powerful apps. I think Android has addressed this very well, but it has also pushed the market. It has pushed Apple (AAPL) with the iPhone and RIM (RIMM) and Windows Mobile. I’m pretty excited about the future; they’re getting increasingly capable browsers, and you can now write native applications across five platforms that will cover most smart phones. I think that having the software platform has freed the hardware makers from spending time on that, and they can rejuvenate their efforts on hardware.

Please talk about enterprise efforts.

Brin: We started in enterprise, like mobile, to address our own needs. When we started with mail in ’04, Web email was like a toy. We really focused on something that would work in an enterprise and then made it available to consumers. We feel we’re farther ahead (than competitors) both in email and in collaborative document-editing. We’re moving toward eventually having everything (all our applications) available everywhere. “I just think the cloud model is a better model….I do think this install-less model of a cloud is better….It’s definitely made me more productive.”

More on enterprise from Brin: We’ve been successful with both SMB [small and medium business] and increasingly with enterprise. We’ve got a big implementation with Genetech (DNA), and in Washington D.C. We’re specifically adding features for enterprise. That’s part of the Postini acquisition–to add some of those email features for enterprises. You’d be surprised to hear some of the things businesses ask for.

Please talk about recent Gmail outages.

Brin: Certainly we’re not happy with any outages. With those outages we’re at the “three nines” level, which is not where we want to be. Targeting “four nines” by end of quarter. We’ll let you know how we do. Focusing not only on outages, which we don’t like, but recovery time. Second outage could have been resolved in five or ten minutes, but we made errors in handling it, and it extended over an hour. But if you look at a typical enterprise today, those outages tend to add up to more than even these kinds of outages that we had in Q3. Also, we’re working on the number of people affected by outages. Trying to group people into pods so that if one goes down it doesn’t affect others.

You’re adding more complexity to search. It’s more confusing than it ever was. Same thing with site links. Is that an issue (it is for Danny Sullivan)?

Brin: I’d like to see all the options, available in all the corpuses. We don’t have all the same options in each offering. In terms of the links and snippets that we’re offering, we’re trying to experiment with that.

On Google book deal: If the judge asked you why he shouldn’t be concerned by the concentration of Google’s power, what would you say?

Schmidt: It’s an error to answer a theoretical question from a journalist. But anyway, we won’t get that kind of question. With respect to book search, we were doing something that we thought was appropriate. We were sued, and after three years of discussion, we’ve come to a settlement. This is perfectly normal. From our perspective, this is a settlement we like, it’s a settlement we think they’ll like, and we’ll hear what the court says, within minutes. Let me reframe your question: There’s nothing particularly exclusive about what we’re doing. The rights registry we’re doing is for the benefit of orphan works. “It’s not a particularly good business for us. We’re going it because we think it’s the right thing to do.” We don’t think the settlement is perfect, but we think it’s good.

What are plans to expand book search?

Schmidt: We’re already huge. There are millions of books that have never been read, and we’re going to deliver readers to those books.

Brin: We want as many works as possible in some form, because that’s of tremendous value.

Schmidt: This doesn’t cover all international books, all books in the world. [Some disagreement about this between Brin and Schmidt]. It will take time to get the registry up and running, so for the near future I think that’s all we can achieve.

Back to the economy, please.

Schmidt: We’ve tried for a while to figure out if Google is an accurate predictor of the economy, and we can’t prove it. If we could, we’d brag about it. Last early in the year we saw a decline in U.K., which surprised us. From our perspective, the low point was somewhere in the spring. Which is why I said worst was behind us in May, June. We noticed a recovery “June-ish.” The conventional wisdom is that U.S. recessions are 18-24 months. Bernanke sees a recovery too, which we agree with. Conventional wisdom was that Europe would lag by three-five months, which we’re not seeing. Europe is not one country, and it varies a great deal depending on which country we’re in. I won’t go in to specifics but it’s the obvious stuff–the countries that didn’t have a big bump did not have a big fall. More on being a leading indicator: Obviously we’re a leading indicator in advertising.

Brin: And we’re good indicator for consumer spending, and you can see for yourself by looking at Google trends.

It seems as if Chrome isn’t having the impact with consumers that you would like.

Brin: [Starts, then stopped by Schmidt]

Schmidt: Some of your premise about Chrome is incorrect, in terms of adoption, and we’re going to get that message out.

Brin: It’s actually exceeding our benchmarks.

Schmidt: I see a lot of Macs in this room, and a lot of very sophisticated people are using Macs now and we need to get a version of Chrome out for that, which we’ll have in a couple of months. Key to browser strength is speed. In general, we announced Chrome OS and Chromium product. Everything is linked together: Cloud, chrome, etc.

At one point do Android and the Chrome OS come together or not come together?

Schmidt: Current definition of use platforms has to do with use patterns. Android for mobile, delivered via telecom store, heavily integrated with telco offerings, like our Verizon (VZ) deal, which we’re enormously excited about. The analog for Chrome is that it’s designed for a 10, 12-inch form factor. They both use Linux, etc. But they’re designed for different uses. [Netbooks?] May be some overlap there.

Is Google being too nice? Is there a rethinking of relationships with aggrieved groups?

Schmidt: In many ways we’ve always wanted to be this Google as opposed to the way we were perceived a few years ago. We’re particularly proud of the way we’re working with advertising agencies, which is very important to us. With the media industry, we’re having success with YouTube and YouTube monetization, and we’ll have more on that coming forward….”We have always wanted to have these partnerships….We’re learning how to do them in a way that they win, too.”

Brin: People can now differentiate between us and the Internet.

Schmidt: Google is an innovator. The Internet is causing collisions. Innovation plus collisions equals opportunity. For instance, the fact that Verizon has embraced most of the open principles that we put forth five years ago is shocking. “It’s pretty amazing. This is Verizon. It’s not some itty-bitty telecom start-up.”

Are you uncomfortable with Google employees’ sense of entitlement? [Per new Ken Auletta book]

Brin: [Refers to layoffs--Schmidt corrects him: "We did not have layoffs."] [Addendum: Schmidt was talking about Google closing engineering offices in Phoenix and other locations; Google did have layoffs last winter.] You’re right:

What do you think about publishers requiring pay walls, and how will you help surface that.

Schmidt: We’re starting with that YouTube. Overall, “there’s clearly a market for free content, and that market is the size of the Internet.” Also a market for subscription/paid. The analogy I would offer is TV. We all grew up with “free” TV. Now almost everyone pays for cable, and some people pay for pay-per-view, “which is ridiculously expensive,” but people will pay for particular events, like boxing. I think all three of those uses will emerge. We’re working on payment models, subscriptions, to enable that.

But what about surfacing paid content in search [this comes from WSJ.com editor Alan Murray]? Will you factor the desire of someone to pay for content into results?

Schmidt: We’re not going to use the price you use as our ranking in results. That’s not going to be our signal. But we’ll incorporate the price people are paying for your content into results. But I’m not going to answer this precisely because I don’t want to discuss how we produce results. The most interesting improvement you could make is that to the degree that we have more of the marketplace data available, we could take that information and reflect some of that in our rankings.

The AP CEO said Google or Microsoft might be willing to pay a premium for an advance look at the news.

Schmidt: We have a deal with the AP, and I don’t want to talk about any specifics of any deal. I don’t think that’s proper. “We have to be very very careful not to favor one media organization over another, with regard to speed or latency.” We are staying out of the media business. “You guys are very good at it, and we’re not.”

[Apologies for tech error; I missed the specific question and part of the following exchange, but the subject is entitlement.]

Brin: We cut down on snacks, etc. to “reset expectations” regarding entitlement.

Schmidt: “Google pays very well. Google is clearly a growth company. People at Google don’t work for those reasons at Google. We don’t want them to come to work for Google for those reasons. We want people to come to Google to change the world. Life is short.” The tightening in the last year has been good for this, by the way, the controls put into place by Patrick Pichette, who is our hero, have been very helpful.

Please talk about M&A plans and goal of one acquisition per month.

Schmidt: That’s been our historic pattern. I think we will be buying small companies–five, ten people. That’s where some of our best stuff has been. One day Larry and Sergey bought Android, and I didn’t even notice. Think about the strategic opportunities that has created. Sergey found Google Earth one day while he was surfing on the Web. And then he walked into my office and told me he bought them. “And I said, ‘for how much, Sergey?’ And it turned out to be a few million.”

Would you buy a YouTube?

Schmidt: Is there another one to buy? The problem with that size of acquisition is that you have to make your money back. I think that DoubleClick and YouTube will be two of our best acquisitions. DoubleClick is already close to paying back, and YouTube will get there soon. But bear in mind that any major acquisition now will involve a regulatory review, because of our size and because our competitors will make sure of that.

[Sorry, missed another question]

Do you anticipate making large upfront commitments for new or renewed search deals [as you did with MySpace and AOL]?

Schmidt: I’d rather not comment on search deals. We are in discussions with both of those companies. “Some of our best friends are in those companies.”

[Missed yet another one]

What will new tablet machines [like Apple's] mean for you? And to content producers?

Brin: Hardware is getting amazing with regard to cost. Used to be that display was expensive. Now that’s cheap, and so are chips, etc. Now, the main cost is broadband connection, or cellular, or however you get to the Internet. That’s why wide broadband availability is important to us. Think about how much you spend on access costs compared to the amount you spend on your handset. The phone cost is negligible.

Schmidt: Not sure how to answer question. We provide the infrastructure below what you’re talking about [touch interfaces, etc.]. Kindle is a good example. Don’t think about current one, think about one two or three years out. I think there will be many kinds of things like Kindles, and that’s a material change in the way people will interact with hardware, media.

Brin: I think it’s better if hardware isn’t locked down to specific platforms.

[Long exchange between Schmidt and Danny Sullivan that I'll have to pick up later]

Should Google be required to lease servers and access to Google checkout numbers to deal with “lock-in” issues that broke up the telcos?

Schmidt: Google Checkout isn’t interesting. But I think your analogy is wrong and that there are no data to support your theses.

[I missed the next question on the book settlement about orphan works, etc.]

Schmidt: A lot of these complaints are being made by people who don’t want a solution.

What are the reasonable book settlement proposals you’ve seen?

Schmidt: Goal is to get all the books to everyone and to get all the authors compensated properly. Some of the proposals make sense to me, but I don’t want to characterize them. Not a perfect solution, but the best one we can do.

How will book settlement affect international users?

Brin: It won’t. We’d love settlements that work across a range of countries.

Why won’t you be like Microsoft with regard to antitrust?

Schmidt: Many reasons. Culture, for one. Another reason is that majority of users are one click away from moving away from us. Third: If we went into an “evil room” and had an “evil light” shined on us, and we then behaved in an “evil way” we would be destroyed….There is a fundamental trust between Google and its users.”

Schmidt walks through “ludicrous” thought experiment whereby Chrome takes 80 percent of market share and then tries to lock consumers in, noting that it wouldn’t work due to open source.

Do you think you’ll take another stab at moving into radio, print?

Brin: We are quite optimistic on the TV front. Radio and print didn’t pan out as well as we thought initially. One of the reasons is that those mediums are moving online and consumers are moving online and the publishers/producers want to work with us there. “We were kind of at the dock where the ship had already left.” But TV is quite similar to the Web in terms, potentially, of measurability, so we’re excited about those prospects.

Is page rank broken? People are gaming it, etc.

Brin: No. We have to continually develop. Part of the issue is span, but the main issue is that everything changes. We’re doing a much better job of ranking than we did a decade ago. If we just rested on our laurels with what we wrote in paper from 1998, we’d be in big trouble.

In response to a question during Google’s quarterly earnings call today, chief financial officer Patrick Pichette contended that the company could begin making a substantial profit, someday soonish. Here’s my paraphrased note from the call (I should have a verbatim quote later on): “In the not too distant future, we see it being very profitable.”

If Google really does pull this off, it will be a remarkable turnaround project. Google shelled out $1.65 billion for YouTube in 2006, but since then, has struggled to get a handle on the site’s potential and pitfalls.

YouTube is exponentially bigger than any competitor, but has struggled to turn its enormous audience into dollars. And its costs are exponentially bigger than any other competitor, too: Each video in its catalog represents a liability for the site, which has to host the clip and pay to stream it to users–and users are uploading something like 15 hours of video per minute to YouTube.

Google has never offered up any financial detail about YouTube’s performance, and didn’t during the call. Analysts have had good sport trying to figure out just how much revenue the site takes in and how much money it loses. One recent report concluded that the company was losing nearly half a billion dollars a year, while another pegged it at a more modest $174 million.

But the company has been fairly upfront about what it wants to do with YouTube: Get more professionally made videos, as opposed to stuff that users make themselves, on the site, and then sell as many ads as it can against them.

Google CEO Eric Schmidt did boast during the call that YouTube’s “monetized views” have tripled within the last year and that the company now sells ads against “billions” of video views every month. But this clip remains ad-free:

Top line for Google’s Q2 earnings: Net revenue of $4.07 billion and earnings of $5.36. The Street was looking for net revenue of $4.05 billion and earnings of $5.05.

CEO Eric Schmidt isn’t overly effusive: “Google had a very good quarter, especially given the continued macro-economic downturn. While most of the world’s largest economies shrank, Google’s year-over-year revenues were up 3%. These results highlight the enduring strength of our business model and our responsible efforts to manage expenses in a way that puts us in a good position for the economic upturn, when it occurs.”

Meanwhile paid-click growth was up 15 percent, and the company continues to clamp down on expenses: Google’s headcount actually shrank in the last three months, from 20,164 to 19,786 full-time employees.

I’ll be listening in on the call and occasionally updating here.

• Schmidt: “Youtube is now on a trajectory we’re very pleased with.”
• “Too early to tell when the recovery will materialize.”
• CFO Patrick Pichette: Still hiring, but decrease in headcount came from previously announced layoffs.
• Product SVP Jonathan Rosenberg: We’re focusing more than ever on power users.
• Mobile monetization picked up, driven by smart phones. YouTube’s monetized views have tripled in the last year.
• Sales boss Nikesh Arora: Small advertisers have stayed consistent during downturn, and larger advertisers who have been on sidelines are coming back.
• Schmidt on Chrome OS: We’re talking to manufacturers about designing “products that are very, very exciting.” Will Chrome run on existing hardware? Available for download? Still to be worked out.
• Was June soft? Schmidt: We generally don’t parse interquarter trends. On YouTube: Monetizing “billions of views” per months. [Nothing approaching real numbers or real context].
• Arora: “Significant sellthrough” in markets where Google has YouTube homepage for sale. Next phase of YouTube sales emphasis will be preroll ads on short-form videos.
• Arora on YouTube “trajectory” comment: We’re excited about getting pieces in place to drive this forward [i.e., not talking about numbers]. Customers accepting YouTube ads: “It’s becoming accepted user behavior where they’re going to watch premium content that people have invested in, they’re going to watch pre-roll ads.”
• Is YouTube profitable? Pichette: We don’t give out economics. But in the not-too-distant future, we see it being very profitable.

Here again, per Citigroup’s Mark Mahaney, is a crib sheet for interpreting the results (click to enlarge):

And here are the slides from Google’s investor presentation:

2009Q2_google_earnings_slides –

Robert A. Eustace, SVP Engineering & Research: $1,376,000

Omid Kordestani, SVP Global Sales & Business Development: $1,376,000

Patrick Pichette, CFO: $1,244,000

George Reyes, former CFO: $675,000

Jonathan Rosenberg, SVP Product Management: $1,638,000

Larry Page, Sergey Brin, Eric Schmidt: $0

All fine payouts, to be sure (Larry, Sergey and Eric never take a cash bonus). But for the record, note that these do represent a small tick down from last year, when Eustace, Kordestani, Reyes and Rosenberg each got cash bonuses of $1,683,606. Then again, a year ago, GOOG was trading at $471; this morning it’s at $327 and change.

We should get full compensation info–including how much execs received as base salary and how much they got via stock grants and options awards–within the month when Google releases its annual proxy statement.

Google’s revenue, excluding traffic-acquisition costs, was $4.22 billion, above the Thomson Reuters estimate of $4.12 billion. Earnings per share, excluding certain items, was $5.10, beating estimates. The company also announced plans for an options exchange program for workers whose stock options are underwater.

Updates from its conference call with analysts:

4:33 p.m.–The host introduces today’s conference call participants: Google CEO Eric Schmidt, dialing in from New York; CFO Patrick Pichette and SVP of product management Jonathan Rosenberg, in Mountain View, Calif.; and Omid Kordestani, SVP of global sales and business development, in London.

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