Google reports quarterly profits

GOOG gapped up early in the day but sold off considerably as the day wore on. An intraday chart shows two high-volume time periods which pushed the stock down, one early in the day and one later:



I was reading through Google's 10-Q and made some observations:

• Google's rate of revenue growth is declining as it matures: "However, although our revenue growth rate increased in the third quarter of 2004 compared to the second quarter of 2004, our revenue growth rate has generally declined, and we expect it will continue to do so as a result of increasing competition and the inevitable decline in growth rates as our revenues increase to higher levels."
• AdSense accounts for a greater portion of ad revenue in nine months ended 09/30/04 (50%) than in nine months ended 09/30/03 (40%).
• Google expects AdSense revenue growth to be outpaced by AdWords revenue growth: "Although we entered into a significant new AdSense for search agreement in October 2004, the growth in advertising revenues from our Google Network members' web sites is expected to be less than the growth in revenues from our web sites for the foreseeable future."

The key question to how click-fraud will impact Google is where AdSense revenue is heading compared to total revenue. As it stands now, AdSense accounts for an increasing share of total revenue that is levelling off. We'll have to wait and see if this trend continues.