Leave it to Google (NASDAQ:GOOG) to once again belittle fears from the Yahoo! (NASDAQ:YHOO) camp that the online-advertising market is slowing. As it has typically done in the past, Google is following a lackluster report from its rival with a blowout quarter of its own.

Yahoo! saw third-quarter revenue climb 20% higher? Google's top line soared 70% higher to hit $2.7 billion. Yahoo! saw its profitability dip over the past year? Google's earnings per share skyrocketed to $2.36 a share after a $1.32-per-share showing a year earlier. Back out stock-based compensation and the gain Google booked in selling its stake in Baidu.com (NASDAQ:BIDU), and Google's adjusted earnings of $2.62 a share obliterate the $2.42 mark where analysts were left hanging.

The pros should be used to eating dust by now. Google has smoked profit targets in all but one of its quarters since it went public in the summer of 2004.

If you're somehow surprised by how things turned out this week, I suggest you reread my Monday article titled " Buy Google, Sell Yahoo!" In that column, I emphasized that both companies were marching to different drummers and that Google was about to pass Yahoo! in commanding the lower trailing P/E multiple despite being the much faster-growing company.


Yahoo! EPS

Google EPS

Q4 2005



Q1 2006



Q2 2006



Q3 2006



Past 12 Months



Source: Yahoo! Finance

See that? While Yahoo! is rolling 11s, Google is showing sequential improvement. Analysts didn't expect that out of Google in the seasonally challenging September period. For those scoring the P/E battle at home, Yahoo! and Google are now (as of this writing) sporting nearly identical P/E multiples of 47.2 and 47.6, respectively. They would have crossed paths if Yahoo! shares hadn't fallen and Google's stock hadn't been so buoyant this week.

To be fair, Yahoo! is likely to command a market premium because of its timely overseas investments in companies like China's AliBaba and South Korea's Gmarket. Its 34% stake in Yahoo! Japan is actually worth about $6 to $7 a share in Yahoo! alone.

However, it's clear that whenever Yahoo! bellyaches about sluggish ad trends, especially in the automotive and IT sectors, it's really talking about business that is simply migrating over to Google. If there is fear in powerful threats from Microsoft (NASDAQ:MSFT) or IAC/InterActiveCorp's (NASDAQ:IACI) Ask.com, Google hasn't seen the whites of their eyes yet.

Yes, Google's quarter was amazing in many ways. Despite its successful Google AdSense program, which rebroadcasts its ads on the sites of third-party publishers, it grew even quicker on its homegrown sites. It's been that way for a few quarters now.

Google is a winner. Do you remember all of the cynical commentary that argued that Google was overpriced at $85 a pop when it went public in August of 2004? It turns out that Google was simply priced at less than 10 times what its trailing annual earnings would look like two years later.

So Google hasn't defied gravity. It has defined it. It has refined it. Don't get me started on what it has done for Newton's first law of motion.

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Longtime Fool contributor Rick Munarriz is a huge fan of Google, and it would be his homepage if it weren't for Fool.com taking up that piece of real estate. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has adisclosure policy.