Google reported revenue of $5.7 billion for the quarter ended Dec 31, an increase of 18 percent compared to the fourth quarter of 2007 and an increase of 3 percent compared to the third quarter of 2008. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic-acquisition costs (TAC). In the fourth quarter, TAC totaled $1.48 billion, or 27 percent of advertising revenues.

"Google performed well in the fourth quarter, despite an increasingly difficult economic environment. Search-query growth was strong, revenues were up in most verticals, and we successfully contained costs," said CEO Eric Schmidt. "It's unclear how long the global downturn will last, but our focus remains on the long term, and we'll continue to invest in Google's core search and ads business as well as in strategic growth areas such as display, mobile and enterprise ."

Global Income

Google-owned sites generated revenues of $3.81 billion, or 67 percent of total revenue, in the fourth quarter. This was a 22 percent increase over fourth quarter 2007 revenues of $3.12 billion and a four percent increase over third-quarter revenues of $3.67 billion.

Google's partner sites generated revenues, through AdSense programs, of $1.69 billion, or 30 percent of total revenue. This was a four percent increase over fourth quarter 2007's $1.64 billion and a one percent increase over third quarter revenues of $1.68 billion.

Revenues from outside the U.S. totaled $2.86 billion, or 50 percent of total revenue, compared to 48 percent in year-ago quarter 51 percent in the third quarter. If foreign exchange rates had remained constant from the third quarter through the fourth quarter, fourth-quarter revenue would have been $334 million higher.

Online Advertising Holds Its Own

Aggregate paid clicks, which include clicks to ads served on Google sites and AdSense partner sites, increased about 18 percent over the fourth quarter of 2007 and about 10 percent over the third quarter.

Greg Sterling, principal analyst at Sterling Market Intelligence, expects online advertising to hold its own in 2009, especially on the search front. And Google, he added, is in a strong position compared to some of its competitors who have been battered more by the economy.

"Online advertising as a whole is doing better than traditional media and, within the online segment, search has been the strongest and most resilient component because it's perceived to deliver the most efficient ROI ," Sterling said. "Search has been well established and is being reaffirmed right now as people are try to cut the perceived fat from their marketing budgets."

Despite all the good news, Google's profits at the end of the quarter were down 68 percent. But the company attributes much of it to write-offs of $1.09 billion related to investments in AOL and Clearwire.