Oct. 19 (Bloomberg) -- Google Inc. said third-quarter profit almost doubled, beating analysts' estimates, as the world's most- used Internet search engine sold more advertising and extended its lead over Yahoo! Inc. The shares rose almost 8 percent.

Net income advanced to $733.4 million, or $2.36 a share, from $381.2 million, or $1.32, a year earlier, Google said today in a statement. Profit excluding stock compensation costs was $2.62 a share, beating the $2.56 estimate of Jefferies & Co.'s Youssef Squali. Revenue jumped 70 percent to $2.69 billion.

Chief Executive Officer Eric Schmidt reined in costs and squeezed more money out of each search query, helping drive profit and establishing dominance over Yahoo and Microsoft Corp.'s MSN. Schmidt is now seeking to translate that success into online video, purchasing YouTube Inc. for $1.65 billion.

``Google still really has many tricks in its hat,'' said Safa Rashtchy, an analyst at Piper Jaffray & Co. in Menlo Park, California. He rates Google ``outperform'' and doesn't own the shares. ``This should be a very comforting quarter for investors.''

Shares of Mountain View, California-based Google, up 2.7 percent this year, rose $33.73 to $459.79 at 6:30 p.m. New York time in extended trading on the Nasdaq Stock Market.

Excluding sales passed on to partners, revenue rose to $1.86 billion, compared with the $1.8 billion estimate of Squali, whom StarMine Corp. ranks among the most accurate Internet analysts. He rates the shares ``buy'' and doesn't own them. Analysts on average predicted profit of $2.42 on net sales of $1.81 billion, according to a survey of 28 analysts by Thomson Financial.

Yahoo Contrast

The report contrasts with Yahoo, which on Oct. 17 said third-quarter sales growth was the slowest in four years. Yahoo, owner of the second most-used search engine, is facing mounting competition from Google and newer sites such as News Corp.'s MySpace.com.

To illustrate the divergence, Google generated 10 percent revenue growth over the previous quarter. Yahoo's sales were little changed.

``Google won, Yahoo lost,'' said Erick Maronak, who oversees $1.25 billion as chief investment officer at Victory NewBridge Partners LLC in New York, including Google shares. ``Things are trending in the right direction for Google.''

Google was used for 44 percent of U.S. Web searches in August, up from 37 percent a year earlier, according to ComScore Networks Inc.

``Business is very, very strong for us,'' Schmidt, 51, said in an interview. ``Google is rocking.''

`Very Impressive'

Google has beaten analysts' profit estimates in all but one of its nine quarters as a public company. Total expenses, including research, development and marketing costs, rose 68 percent in the quarter, compared with Squali's estimate of 70 percent, and an 81 percent rise in the previous quarter.

Capital spending rose 68 percent to $492 million from $293 million a year ago as Google spent more on computers and data centers. The company hired 1,436 people last quarter, taking its workforce to 9,378. Sales and marketing almost doubled from a year earlier to $207 million. Research and development costs rose 76 percent to $312.6 million.

Google will continue to hire ``aggressively'' and capital spending growth will probably outpace revenue growth this year, Chief Financial Officer George Reyes said on a conference call.

International Sales

International sales were 44 percent of revenue, compared with 42 percent a year earlier as Google grew outside the U.S.

``What's not to like about Google?'' said William Lyons, an analyst at Westminster Securities in Marietta, Georgia. ``When you double earnings at that level it's very impressive.''

Excluding revenue passed on to Web partners, Google's ad sales probably will rise 65 percent to $4.03 billion this year, equaling 25 percent of the total online advertising market, researcher EMarketer Inc. said this week.

Sales growth from Google's own Web sites outpaced gains on partners' sites. Ad revenue from Google Web sites rose 84 percent to $1.63 billion in the quarter, while ad sales on other sites rose 54 percent to $1.04 billion.

Buying San Bruno, California-based YouTube is part of Google's plan to bolster that growth. The market for video advertising is the fastest-growing segment of online ads.

``Google is executing quite well,'' said Barry Randall, who helps manage about $11 billion at MTB Investment Advisors in Baltimore, including Google shares. ``They're taking share from virtually everyone else in the search space.''

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

Last Updated: October 19, 2006 18:45 EDT