Google boosts results by paying partners lower portion of its revenue

By Alexei Oreskovic

Google's gross revenue increased a relatively sluggish 11 percent in the second quarter. But the internet company's net revenue, which excludes the fees Google pays to partner web sites, still managed to come in ahead of expectations.

Google reported net revenue of $14.3 billion, above the average analyst expectation of $14.26 billion, sending the company's stock up 7.2% to $622 in extended trading on Thursday.

The secret to Google's net revenue beat is the continuing declines in the company's traffic acquisition costs (TAC). Google's TAC as a percent of advertising revenue in Q2 was 21.1%, compared to 21.6% in the first quarter of the year and 22.7% during the second quarter of 2014. In fact, Google's TAC as a percent of ad revenue is the lowest its been in at least two years.