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Google Profits Fall Short Of Forecasts

Jan 31 2014, 2:00am CST | by

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Google Profits Fall Short Of Forecasts

Buoyed by new kinds of ads in the holiday quarter, Google posted slightly better-than-expected fourth-quarter revenue growth of 17%, but profits came in below forecasts thanks to continued losses from its now-jettisoned Motorola Mobility unit and possibly lower mobile ad prices.

The search giant earned a profit of $12.01 a share before stock compensation expenses–under expectations of $12.26 a share–on a slightly higher-than-expected 17% rise in revenues, to $16.9 billion. Net profit was $3.4 billion, or $9.90 a share. Without currency fluctuations, Google revenues would have been up 23%.

Google’s shares were hovering around flat to up or down a fraction in extended trading immediately after the earnings announcement. The stock had risen 2.6% in today’s trading, to about $1,136.

The earnings are almost an anticlimax given Google’s big news recently. On Wednesday, it announced it’s unloading most of Motorola Mobility for $3.1 billion, and earlier in the month, it acquired smart-home products company Nest for $3.2 billion.

Ad prices measured per click fell 11% from a year ago following a third-quarter drop of 8% in the third quarter. Paid clicks rose 31%. Those two numbers have been diverging more and more, but the upshot is that growth in paid clicks is outpacing the decline in prices.

Investors have been concerned about the impact of lower mobile-ad prices as more advertisers opt to pitch people on smartphones and tablets instead of on computers. It wasn’t immediately clear what the impact of greater mobile ad spending was on the quarter.

CEO Larry Page no longer plans to be on the conference call, so we’ll have to settle for his canned statement: ”We ended 2013 with another great quarter of momentum and growth. Google’s standalone revenue was up 22% year on year, at $15.7 billion. We made great progress across a wide range of product improvements and business goals. I’m also very excited about improving people’s lives even more with continued hard work on our user experiences.”

There will be a webcast of the call on Google’s YouTube investor channel (viewable through the window below), and earnings slides are up too. I’ll post the highlights as they happen beginning at 1:30 p.m. Pacific.

And the call is underway, with Chief Business Officer Nikesh Arora and Chief Financial Officer Patrick Pichette.

Pichette is up first since Page is “busy running the company.” He’s going over the numbers you’ve seen, so I’ll just post the few significant ones not already noted.

“Other” revenues nearly doubled, to $1.7 billion, thanks largely to hardware sales, such as its Nexus lines of smartphones and tablets and its Chromecast TV device.

Arora goes over the business stuff. Performance was strong in automotive, retail, and CPG segments. What’s driving growth? Google’s core performance ads, mostly search; brand ad progress; and ad tech platforms such as its DoubleClick ad placement systems.

On performance ads, that is, ads bought by direct marketers to get clicks and fairly immediate sales: He says the strength is being driven by better measurement to determine the impact of search ads on ultimate sales or other actions, no matter what device they ultimately happened on.

He says there’s great momentum on Product Listing Ads, the ads introduced early last year with product images.

On brand ads: YouTube is obviously a big driver. Another key is new, more creative ad formats such as Engagement Ads on its ad network, that offer more interaction potential. Not least, Google’s push to measure ads based on whether they were actually viewable is resonating with brands, he says.

On ad tech: Google’s DoubleClick ad exchange, a stock-market-like system, is attracting more advertisers and publishers, he says.

Source: Forbes


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