Google Revenue Falls Short of Estimates on Declining Ad Prices

Google Inc. is finding it harder to keep ad prices from slipping amid an expansion into mobile services and developing markets.

Revenue, excluding sales passed on to partners, was $13.2 billion, the company said in a statement Thursday, matching analysts’ average projection for $13.2 billion, according to estimates compiled by Bloomberg.

While Google remains the largest destination for advertisements on the Internet, its audience is steadily migrating to smartphones, where the company gets less money for marketing spots than on desktops and tablets. Prices are also falling as Google expands outside the U.S., where advertisers spend less money on marketing via the Web. Even though Chief Executive Officer Larry Page is boosting traffic, with total volume up 17 percent, the average price for an ad fell 2 percent.

“The problem is they get more traffic coming from Indonesia and Turkey and places where there’s not as developed an ad market, so pricing is lower,” said Martin Pyykkonen, an analyst at Rosenblatt Securities Inc. in New York. “Countries like that are mostly mobile traffic, so it just suppresses the number.”

The shares of Mountain View, California-based Google fell as much as 6.2 percent in extended trading. The stock declined less than 1 percent to $536.53 at the close in New York, leaving it down 4.3 percent this year.

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Third-quarter net income fell 5.4 percent to $2.81 billion, or $4.09 a share, from $2.97 billion, or $4.38, a year earlier. Profit, excluding some items, was $6.35 a share, compared with analysts’ average projection for $6.53.

As more people use smartphones to check mail, manage their finances and access Web services, a third of search-based ad spending is now on tablets and mobile phones, up from less than 20 percent a year ago, according to IgnitionOne. Since ads on smartphones cost less, total mobile-ad prices in the U.S. declined 9 percent during the third quarter while desktop ad prices fell 1 percent, the digital-marketing services company said.

Google is bolstering its services to attract more marketers. Last month, the company unveiled tools that automatically resize ad spots for desktop computers to fit mobile devices. In August, the company extended a mobile- advertising feature that show what products are available nearby when users search for items.

Page is also stepping up acquisitions. The company more than tripled spending on deals in the first half to $4.2 billion, including $3.2 billion for thermostat company Nest Labs Inc. Google also announced acquisitions of more than $1 billion for home-camera company DropCam Inc. and satellite service Skybox Imaging Inc.