Jan. 31 (Bloomberg) -- Google Inc., owner of the most-used Internet search engine, said fourth-quarter profit more than doubled as the company expanded its lead over Yahoo! Inc. and sold more advertising outside the U.S.

Net income rose to $1.03 billion, or $3.29 a share, from $372.2 million, or $1.22, a year earlier, Google said today in a statement. Sales rose 67 percent to $3.21 billion. Excluding revenue passed on to partners, sales were $2.23 billion, matching the $2.2 billion estimated by 29 analysts in a Bloomberg survey.

Google shares slipped because some investors have come to expect the company to breeze past sales estimates. Google, which dominates Internet search and may get $1 out of every $4 spent on Web ads in the U.S. this year, widened its market-share lead and turned to international markets to fuel growth.

``Revenues were in line, and that may be a cause for some traders to sell,'' said Timothy Ghriskey, who oversees more than $1 billion at Solaris Asset Management in Bedford Hills, New York. Investors had a ``whisper number'' in mind that was higher than analysts' estimates, he said.

Shares of Mountain View, California-based Google fell $3.76 to $497.50 in extended trading after the report. They had risen $7.18 to $501.50 at 4 p.m. in Nasdaq Stock Market trading and advanced 16 percent in the past year.

Profit, excluding stock-based compensation costs, was $3.18 a share. Analysts had estimated profit of $2.91, according to the average in a Bloomberg survey. Google has now beaten profit estimates in all but one of its 10 quarters as a public company.

Of 38 analysts that follow the stock, 33 recommend buying it, four say ``hold'' and one suggests selling.

Expansion Plans

Chief Executive Officer Eric Schmidt is looking beyond the small text links that appear next to search results for the next wave of growth. The company bought YouTube Inc. for $1.65 billion in November to tap the video-ad market, and has tested ad sales in 50 newspapers and on radio. Free services such as online maps and e-mail push users back to Google's search engine, helping generate more ad revenue.

``We had just an amazing year, an amazing quarter,'' Schmidt said in an interview. ``Business was very, very strong.''

Sales growth from Google's own Web sites outpaced gains on partners' sites. Ad revenue from Google Web sites rose 80 percent to $1.98 billion in the quarter, while the company's ad sales on other sites rose 50 percent to $1.2 billion.

``It's just a fantastic business model,'' said Greg Barlage, who helps handle $35 billion, including Google shares, at Boston- based Baring Asset Management.

No Forecast

In today's report, Google maintained its policy of not forecasting earnings, a practice the company says is designed to keep it from managing earnings to meet analysts' estimates.

Schmidt, 51, said improvements to Google's advertising software meant more people clicked on ads, even though the company showed fewer ad links next to search results. Total advertising clicks rose 61 percent from a year earlier.

International sales were 44 percent of revenue, compared with 38 percent a year earlier. The company controls more than 70 percent of the Web-search market in France, Germany and the U.K., according to ComScore Networks Inc., which tracks Web use.

Google's share of U.S. Internet searches rose to 47 percent in the fourth quarter, from 40 percent a year earlier, according to ComScore. Yahoo's share fell to 28 percent from 29 percent, while Microsoft Corp. fell to 11 percent from 14 percent, Reston, Virginia-based ComScore said.

Costs Rising

Online video, payments and satellite mapping are pushing up costs. Expenses, including research, development and marketing costs, rose 59 percent in the quarter.

Capital spending rose 49 percent to $367 million from $245.8 million a year ago, mostly for new computers and data centers.

Spending on Internet ads in the U.S. may rise 23 percent to $20.7 billion this year, accounting for 7 percent of total ad spending, according to Merrill Lynch & Co. analyst Lauren Rich Fine. Internet search ads will be the largest and fastest-growing part of the industry, Fine said in a Dec. 1 note.

Google may take 28 percent of the total U.S. Web advertising market this year, compared with 17 percent for Yahoo, New York- based market researcher EMarketer Inc. said last week.

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

Last Updated: January 31, 2007 19:13 EST