Updated April 12, 2012, 5:24 p.m. ET.

Google Issues Stock Split As Profit Rises 61% .

By NATHALIE TADENA

Google Inc. declared its first stock dividend designed to appease investors but also to allow its founders to maintain control over the company.

The announcement came as Google reported its first-quarter profit rose 61% on the strength of paid advertising clicks.

But the bigger news was a two-for-one stock split that involves creating a new class of non-voting capital stock, Class C, that will be listed on Nasdaq.

Many investors had been calling for Google to issue a dividend from its growing cash pile, which has swelled to nearly $50 billion.

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Digits: Google Explains Stock Split
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In a letter to shareholders, Google's founders, Larry Page and Sergey Brin, said of the decision behind the stock split that the company wants to preserve a corporate structure that gives them and management the bulk of voting control.

"We recognize that some people, particularly those who opposed this structure at the start, won't support this change—and we understand that other companies have been very successful with more traditional governance models," the founders said. "But after careful consideration with our board of directors, we have decided that maintaining this founder-led approach is in the best interests of Google, our shareholders and our users."

According to last year's 10-K annual filing, Google had 252.7 milion shares of Class A stock and 69.5 million shares of Class B stock outstanding at March 31, 2011.

The Class B shares have 10 votes apiece. The two founders each owned about 27 million Class B shares as of last March, which gave them each about 29% of the total voting power. Eric Schmidt, the former chief executive who is now executive chairman, holds 9 million Class B shares, giving him about 10% of the total voting power.

Meanwhile, Google posted a first-quarter profit of $2.89 billion, or $8.75 a share, up from $1.8 billion, or $5.51 a share, a year earlier. Excluding stock-based compensation, profit rose to $10.08 from $8.08 a share.

Revenue increased 24% to $10.65 billion. Traffic-acquisition costs, commissions paid to marketing partners, represented 25% of advertising revenue. After the costs, total revenue was also up 24% to about $8.14 billion.

Analysts surveyed by Thomson Reuters expected earnings of $9.65 a share and revenue of $8.15 billion after deducting traffic-acquisition costs.

U.S. paid clicks, a measure of how frequently consumers click on Google's advertisements, rose 39% from a year earlier and was up 7% sequentially. The average cost that advertisers paid Google per click decreased 12% from the year-ago period and 6% from the prior quarter.

While the number of clicks has been consistently increasing in recent quarters, questions have emerged about how newer forms of ads, such as those viewed on mobile devices, will affect the company's business. Ads placed on mobile devices generate less revenue than ads viewed on desktop computers. Cost per click also fell sequentially in the third and fourth quarters.

In the latest period, total costs jumped 16%. Recently, Google has been investing in new products, advertising, hiring and worker compensation, though growth in costs had outpaced revenue growth in 2011.

Google, which already boasts the dominant market share of search advertisements, continues to expand in areas outside its traditional search business, pitting it against formidable competitors in the mobile, social networking and online video markets.

Though Google has long incubated a dizzying array of projects, it has been shuttering some and homing in on others as Chief Executive Larry Page streamlines the company. Google's young social network, Google+, has seen its active users jump to more than 100 million from the 90 million figure released in January. Google is also in the process of taking over Motorola Mobility Holdings Inc. for $12.5 billion, in what would be the company's biggest acquisition ever.

Google Issues Stock Dividend As Profit Rises 61% - WSJ.com