Tags: Google | Revenue | Ad | Demand

Google Revenue Tops Analysts' Estimates on Robust Ad Demand

Thursday, 17 July 2014 05:30 PM

Google Inc.’s sales exceeded estimates in the second quarter as the company sold more advertising alongside Web-search results.

Revenue, excluding sales passed on to partners, was $12.7 billion, topping the average projection of analysts for $12.3 billion, according to data compiled by Bloomberg. Nikesh Arora, the chief business officer who drove Google’s advertising growth over almost a decade, is stepping down to become vice chairman of SoftBank Corp. and chief executive officer of SoftBank Internet and Media, the company said in a statement Thursday.

Google CEO Larry Page is adding new features in mobile, video and Web services to boost user traffic and attract marketers, seeking to supplement Google’s main ad business. While the biggest Web search company is getting less money for marketing spots, where the average price for an ad declined 6 percent, the expansion efforts helped push up the number of clicks on promotions by 25 percent.

“The fundamental story seems very much intact,” said Scott Kessler, an analyst at S&P Capital IQ, who rates the stock a buy. “Google’s revenues have grown at a healthy to robust pace over the last couple of quarters and years, and we don’t see that fundamental story changing.”

Google shares climbed as much as 3 percent in extended trading. The stock declined 1.7 percent to $580.82 at the close in New York, leaving it up 3.6 percent this year.

Arora Exits

Omid Kordestani, who helped craft Google’s business model and was a senior adviser to the company, will take over Arora’s role, Google said. Arora joined before the company’s initial public offering and was instrumental in building Google’s search-ad service into the largest online ad business in the world.

“He’s done a great job — change happens, it could be healthy even,” Colin Gillis, an analyst at BGC Partners, said of Arora’s departure. “The positives are still positive.”

Second-quarter profit excluding certain items was $6.08 a share, compared with the average analyst estimate for $6.24.

Ad prices are falling as smartphones encourage users to bypass Google search services and instead go directly to applications to find information. By 2016, Google’s share of the U.S. mobile-search market is projected to fall to 64 percent from 83 percent in 2012, according to EMarketer Inc.

Net income, including Motorola, which is being sold to Lenovo Group Ltd., rose to $3.42 billion, or $4.99 a share during the quarter, from $3.23 billion, or $4.77, a year earlier.

Ad Market

The 6 percent decline in ad prices from a year earlier was slower than the 9 percent drop in the first quarter. In the broader mobile-ad market, prices on smartphones were 57 percent lower than those on desktop computers during the second quarter, according to Covario Inc., a provider of services for advertisers to place digital-marketing messages on search engines and other websites.

In order to tap into new sources of revenue, Google introduced an ad service called enhanced campaigns, prompting marketers to funnel more of their spending to wireless devices. The company also has been pushing retailers to spend more on product listings that show off wares with pictures and pricing.

Google’s operating expenses, other than the cost of revenue, climbed 25 percent during the quarter to $5.58 billion.

Ad Performance

Within total ad sales, Google also laid out new metrics on how ads performed on and off its services. Google sites, including its search feature, saw average prices fall 7 percent during the quarter while the number of clicks climbed 33 percent from a year earlier. Google networks ads, including graphical advertisements posted on outside sites, saw prices decline 13 percent while clicks rose 9 percent.

In addition to investing in existing products, Google ramped up spending on acquiring new companies and businesses. Earlier this year, Google spent about $3.2 billion on Nest Labs, a digital-thermostat maker. Last month the search company announced it would spend $555 million on in-home camera maker DropCam Inc. Google has also made several smaller purchases this year, benefiting its advertising, cloud services and mobile businesses.

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Google Inc.'s sales exceeded estimates in the second quarter as the company sold more advertising alongside Web-search results.
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2014-30-17
Thursday, 17 July 2014 05:30 PM
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