Google Profits Surge Despite Advert Challenges

Chris Preimesberger,

Google has beaten Wall Street estimates with its Q1 results as it coped with a decline in advertising prices

Google has pleased Wall Street after it posted a healthy first-quarter 2013 earnings report that exceeded market projections in profits.

However the search engine giant did also miss the top-line revenue goal that analysts thought it would attain.

Google Results

Revenue from the Web services giant’s advertising business slipped to $13.97 billion (£9.1bn), down from $14.4 billion (£9.4bn) in the previous quarter. A consensus from Thomson Reuters analysts had expected Google to report revenue of $14.1 billion (£9.2bn), or $10.66 (£6.97) per share.

googlewallet01Google, despite all the Web services and other businesses that include software licensing, YouTube, Google enterprise tools, Google+ social networking, Enterprise Search and several others, saw its general Web search business account for 92 percent of the company’s sales in Q1.

However, Google’s profit expanded more than anybody expected – 31 percent year over year – with the company reporting $3.9 billion (£2.5bn) net income, or $11.58 (£7.57) per share.

Google’s paid-click search volume was up a healthy 20 percent over Q1 2012, while the cost per click was down 4 percent over a year ago. Cost-per-click is the average amount advertisers pay Google each time a user clicks on an ad.

Mobile Advertising

Google, like Facebook and Yahoo, is still finding its way in the on-mobile-device advertising business. Google is the only one of those three Web services giants with its own mobile operating system – open-source Android – which is by far the world’s most predominant smartphone engine.

The main problem all three companies have is that ads published on mobile devices (including tablets) bring lower prices than standard Web-based ads for laptops and desktop PCs, so the average cost-per-click has dropped despite the increase in the number of paid clicks.

For example, Yahoo revealed in its own quarterly earnings call earlier this week that its display advertising fell a steep 11 percent to $455 million (£297m) last quarter. CEO Marissa Mayer blamed the decline in large part to consumers using the site on their mobile devices, which have lower ad rate value.

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Originally published on eWeek.