Google profits rocket while Yahoo lags behind

Google enjoyed a 44.7 per cent share of the US search market in May

Google's profits more than doubled in the second quarter of 2006, pushing it even further ahead of nearest rival Yahoo. 

The search giant reported net income of $721m (£388m), up from $343m (£185m) a year earlier. This equates to earnings of $2.33 (£1.25) per share, significantly higher than Wall Street predictions of $1.94 (£1.05).

Google enjoyed a 44.7 per cent share of the US search market in May, compared with Yahoo's 28.5 per cent.

"The opportunities before us really are unlimited at present," Google chief executive Eric Schmidt told analysts. "It's another good day and a good quarter at Google."

Yahoo's sales and profits came in below expectations. The company also said that it would be late in introducing new advertising technology that could help it to catch up with Google.

The company is also absorbing the loss of its biggest advertising client, MSN, which now sells its own advertising. 

More than 99 per cent of Google's revenues come from advertising. The company put its revenue increase, up 77 per cent year-on-year at $2.46bn (£1.33bn), down to ever-more proficient placing of contextual ads.

These ads are linked automatically to the subject matter in search results, Google Mail emails and other content.

"We did really well in a seasonally weak period for us," said Schmidt. "Big companies as they get larger seem to slow down. We continue to innovate. It looks as though our model continues to work extremely well."

George Reyes, chief financial officer at Google, warned that margins may decline as it continued to invest aggressively in the business. Google had paid $699m (£377m) in capital spending in the quarter, including $319m (£172m) in property deals.

"We expect to hire aggressively around the world in sales and marketing and [research and development] in the third quarter," said Reyes.

Google's headcount grew 17 per cent in the second quarter to nearly 8,000 employees.