Oct. 20 (Bloomberg) -- Google Inc., the world's most-used Internet search engine, posted a sevenfold jump in profit, surpassing analysts' estimates, after adding advertising space and releasing new mapping and instant messaging features. The shares surged 11 percent.

Third-quarter net income rose to $381.2 million, or $1.32 a share, from $52 million, or 19 cents, a year earlier, Mountain View, California-based Google said today in a statement. Net revenue doubled to $1.05 billion.

Results beat analysts' estimates for a fifth straight quarter and Google extracted record revenue from advertisers seeking to capture the 400 million users that visit its sites each month. Large companies were lured by Google's addition of a third ad spot above some search results and new features that let advertisers target specific Web sites. The demand helped Google exceed its expectations, Chief Executive Officer Eric Schmidt said.

``Google continues on a very strong ramp,'' said Mark Stahlman, an analyst at Caris & Co. in New York. He has an ``above average'' rating on the shares and doesn't own the stock. ``It's clear there's a massive shift away from mass media to personalized media. The future looks good for Google.''

Profit excluding stock-based compensation costs and other one-time items was $1.55 a share, beating the $1.36 average analyst estimate. Analysts typically have had difficulty predicting Google's earnings because the company refuses to give guidance. Sales beat the $944 million average estimate.

Google shares, up 57 percent this year, jumped $33.05 to $336.25 in extended trading, signaling the stock will open at a record when trading begins tomorrow. The shares, which sold for $85 at last year's initial public offering, earlier fell $5.50 to $303.20 in Nasdaq Stock Market composite trading.

`Worth More'

Google's ability to help advertisers reach specific audiences, either through Web sites or by placing ads right by search results, has enabled the company to keep growing.

``We make quality improvements to our advertising network,'' Schmidt, 50, said in an interview. ``When you improve the quality, that ad is worth more money.''

The results echo those of Yahoo! Inc., owner of the most- visited Web site, which earlier this week reported profit and sales that topped analysts' estimates.

The surging advertising sales for Google and Yahoo contrasts with the newspaper industry. New York Times Co., Knight Ridder Inc. and Gannett Co. this month reported quarterly sales growth of less than 5 percent. Tribune Co., the No. 2 U.S. newspaper publisher, said on Oct. 13 that third-quarter sales fell 0.8 percent to $1.4 billion.

User Growth

``It speaks to the continued strong growth in Google as well as the entire online advertising marketplace,'' said Henry Ellenbogen, an analyst at T. Rowe Price Group in Baltimore, which owned 1.43 million Google shares as of June.

Google's user growth tracked at twice the pace of Yahoo's as the company expanded beyond search, according to ComScore Networks Inc. Google also outnumbers Yahoo in search by two to one, handling 56 percent of global Web queries in August, compared with Yahoo's 21 percent, according to Reston, Virginia- based ComScore, which tracks Web use.

`Tremendous Growth'

``The strength is from a lot of areas,'' said Rick Summer, an analyst with Morningstar Investment Services Inc. in Chicago. ``There was tremendous growth in online advertising, which is not abating at all.''

Google's net revenue, which excludes fees paid to other sites for displaying ads, was up from $503 million in the same quarter last year. Total revenue was $1.58 billion, up from $805.9 million.

Analysts exclude the ads that Google places on sites such as AOL and the New York Times. Google passed on $530 million in sales to these sites in the quarter.

The portion of revenue handed over to other Web sites shrank to 34 percent from 36.1 percent in the second quarter, Google said, indicating Google's ad revenue from its own sites is growing faster than those of its partners.

Google added new Web sites and software this quarter to lure users. Google Talk, which lets users swap messages and make Internet phone calls, challenges software from Microsoft, Yahoo and AOL. The Sidebar software searches for PC files and launches applications, encroaching on features in Microsoft Windows.

Costs Rise

As the company grows, so too do its costs.

Operating margins fell to 33.5 percent in the quarter, from 34.4 percent in the second quarter, Google said today.

Research and development spending more than doubled to $151.7 million from a year ago and capital spending rose 87 percent to $293 million from last quarter.

Schmidt, who has overseen Google's growth after Page and Brin built the search engine as graduate students at Stanford University, told analysts on a conference call today that research and development costs will increase into the ``foreseeable'' future.

The company has added more than 2,000 employees in the past year, ending the quarter at 4,989, and last month announced plans to build a 1 million-square-foot facility campus at a NASA campus in Silicon Valley. This month, Google signed an agreement with Sun Microsystems Inc. to distribute Sun's word processing and spreadsheet functions in a challenge to Microsoft.

Those initiatives, in addition to plans to scan the world's library books, are contributing to rising costs.

Google raised an addition $4.18 billion in a stock sale in September, a decision some analysts took as a sign the company may embark on acquisitions. Google is in talks to jointly buy a stake in AOL with Comcast Corp., the largest cable-television provider.

Google's international revenue rose to 39 percent of total sales from 35 percent.

``Google has still been as bullish as you can imagine,'' Summer said. ``They're excited about upcoming growth, continuing to capture the online ad-spending dollar.''

To contact the reporter on this story: Jonathan Thaw in San Francisco at jthaw@bloomberg.net.

Last Updated: October 20, 2005 20:21 EDT