Google just released third quarter earnings. It reported revenues of $5.4 billion (about $4 billion after traffic acquisition costs are taken out, which is what Wall Street looks at) and profits of $1.3 billion. The $4 billion in revenues is right around what investors were expecting, and non-GAAP net income of $4.92 a share was well above the $4.79 consensus. Better control over costs contributed significantly to the upside surprise.

Here are my liveblog notes from the call:

CEO Eric Schmidt: Google had a good quarter. Traffic and revenue were both solid. Search query traffic is growing in almost every vertical. As marketing budgets are being squeezed, targetable ads are more valuable to advertisers. And as consumer budgets are being squeezed, people are using the Web for more comparison shopping to hunt for bargains online and in stores.

It is pretty clear the economic situation is worse than even a month ago. What started off as a financial crisis appears to be affecting the wider economy. We are all in uncharted territory. We have always managed for the long term. That is more important than ever.

Search, which is Google’s core, is where we are putting a lot of our investment. Better search, better ads, index side getting larger, better personalization. More highly relevant ads against as many queries as possible.

Tags: acquisition, advertisement, advertiser, bargain, consumers, economy, google, investors, marketers, possibilities, profits, revenues, target, traffic