I guess I picked the wrong week to be bearish on Google (Nasdaq: GOOG).

The planet's leading search engine trounced recently reduced earnings expectations, leaving a growing pool of Google cynics happy to be wrong.

Revenue climbed 42% higher to $5.2 billion, or $3.7 billion once you back out traffic acquisition costs (which analysts do, in laying out their targets). Earnings didn't keep up the pace, but still rose 30% higher to $4.12 a share, or $4.84 a share on a non-GAAP basis. It's on that adjusted basis that Wall Street was looking for a profit of just $4.52 a share on $3.6 billion.

I guess that analysts should have stuck with their first answers, since they were expecting earnings to clock in at $4.87 a share three months ago. That was before worrywarts began lumping Google in with more traditional ad-dependent media companies and third-party research data showed a dramatic slowdown at Big G. With comScore data showing year-over year click volume growing between 0% and 3% in each of the first three months of 2008, it was hard to lift those Google pompons. The research was limited to Google.com's domestic site. It also didn't shed light on whether sponsors were paying more or less this time around.

The answers are comforting. Paid clicks actually rose by 20% during the quarter, according to the ultimate Google researcher: Google itself. When you reintroduce the 42% top-line surge, you see that advertisers are paying more (even if this figure is going to be harder to lean on as a gauge in the future, with last month's completed DoubleClick acquisition making Google a force in display advertising).

A clean break from the past
Last night's report is a refreshing break from Google as a recent disappointer. The company had come up short in two of the past three quarters. At least now we can say that Google is batting .500 over the past year.

One trend that Google didn't break from is its growing reliance on its own sites. Each of the past few quarters has found Google's owned and operated websites growing at a healthier clip than its network of third-party AdSense sites. The trend continues, with revenue at Google's owned and AdSense sites growing by 49% and 25%, respectively.

One can argue that AdSense is becoming a smaller part of the picture at Google, and not simply because it has become just a third of the overall gross revenue mix. It's actually even smaller than that. When you consider that $1.49 billion of the $1.69 billion generated through AdSense sites went back into the program in traffic acquisition costs (TAC), it means that just $0.2 billion of the $3.7 billion in post-TAC revenue came from AdSense.

So, is it worth the hassle? You bet. By plastering its ads through sites like Time Warner's (NYSE: TWX) AOL and Answers.com (Nasdaq: ANSW), Google is clearing ad inventory, recruiting new sponsors, and keeping that ad space out of the hands of rivals Yahoo! (Nasdaq: YHOO) and Microsoft's (Nasdaq: MSFT) MSN.

Swinging away from the on-deck circle
The big question is if Google's report bodes well or poorly for Yahoo!'s upcoming report. Yahoo! announces on Tuesday, and plenty is riding on those numbers. Options ranging from Microsoft retracting its bid to lowering its bid to Yahoo! justifying a higher offer are on the table come Tuesday night.

Even with Google's impressive numbers, plenty of key variables are missing. It certainly doesn't help that third-party research is tugging at both ends, with one firm pointing to Yahoo! continuing to lose search engine market share, while another has the company gaining a bigger share of the interactive advertising dollar.

History has also shown that Yahoo! can lay out a stinker of a quarter before a Google beauty, and vice versa.

The one comforting part of Google's report that should apply to Yahoo! is the trend of advertisers paying more for generated leads. An iffy economy could have made sponsors more miserly, yet apparently they're desperately willing to pay more to create the direct relationships with consumers that are available through Web-based marketing.

Win Google's billions
Tim Beyers recently took a look at what Google should do with the $14.2 billion in cash and marketable securities it was clinging to at the start of the year. The bad news is that the $3.1 billion DoubleClick deal ate into that stash. Google's greenery now stands at $12.1 billion.

The good news is -- well, that $12.1 billion is a whole lot of money. That will be even more dear if Microsoft completes its deal for Yahoo!, a move that will transfer most of the money held by both Microsoft and Yahoo! to Yahoo! shareholders.

If a moribund stock market makes cash the legal tender of choice, Google will be the one able to make a killing as it picks off attractive properties at even more attractive prices, given the absence of cash bidders. This doesn't mean that the few companies beating Google at its own game -- like Baidu.com (Nasdaq: BIDU) in China or Salesforce.com (NYSE: CRM) in cloud computing -- can be had. It just means that the flexibility is there if necessary.

Google clearly doesn't need to go for a buyout makeover. In fact, given the sweet quarter that Google just turned out, maybe Google shouldn't change a thing, beyond perhaps snickering at those -- like me -- that began to foolishly doubt its awesomeness.

Microsoft has made the cut as an Inside Value stock pick. Time Warner is a Stock Advisor recommendation. Baidu.com is a Rule Breakers staple. So many newsletters, so little time? Don't worry. You can check them out for free for the next 30 days with trial subscription offers.

Longtime Fool contributor Rick Munarriz is back to being a Google bull, 52 weeks a year. He does not own shares in any of the stocks in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.