Google's outsized ad growth offsets steep price decline

SAN FRANCISCO Thu Jan 30, 2014 6:06pm EST

A Google logo is seen at the garage where the company was founded on Google's 15th anniversary in Menlo Park, California September 26, 2013. REUTERS/Stephen Lam

A Google logo is seen at the garage where the company was founded on Google's 15th anniversary in Menlo Park, California September 26, 2013.

Credit: Reuters/Stephen Lam

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SAN FRANCISCO (Reuters) - Google Inc's quarterly revenue beat Wall Street's target despite an ongoing decline in prices for its online ads and deepening losses at Motorola, the handset-making division to be sold to China's Lenovo.

Shares of Google, which have risen more than 20 percent in the past three months, rose nearly 4 percent to $1,178 in after-hours trading on Thursday.

Google executives said in a conference call on Thursday that the company benefited from strong demand from brand marketers and retailers in the fourth quarter, as well as healthy demand for online ads in international markets.

"In the holiday season one thing has become very clear, the Web has truly become the new holiday store window," Google Chief Business Officer Nikesh Arora said.

Paid clicks on Google's online ads jumped 31 percent during the typically busy holiday quarter, but the average cost per click that marketers paid the company slid 11 percent.

Google's advertising rates, like those of other Internet companies including Yahoo Inc, has been under pressure as more consumers access its online services on mobile devices such as smartphones and tablets, where advertising rates are lower than on PCs.

Motorola, which Google has agreed to sell to China's top PC maker for $2.91 billion, saw operating losses of $384 million in the quarter, more than double the $152 million loss from a year earlier.

The Internet search giant has struggled to turn the unit around in the face of steep competition from Apple Inc, and the sale of the loss-making unit is considered a positive for Google.

Google's consolidated revenue, which includes the money-losing Motorola smartphone business, rose to $16.86 billion from $14.42 billion in the fourth quarter of 2012. Analysts polled by Thomson Reuters I/B/E/S were looking for $16.75 billion.

Revenue in Google's core Internet business totaled $15.7 billion in the last three months of the year, up 22 percent from the $12.91 billion in the year-ago period.

Google's consolidated net income was $3.38 billion, or $9.90 per share, compared to $2.89 billion, or $8.62 per share, in the year-ago period. Excluding certain items, Google said it earned $12.01 per share, below analysts' expectations for about $12.20.

(Reporting by Alexei Oreskovic; Editing by Bernard Orr)

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Comments (2)
rvm3 wrote:
Nice try, Reuters, but Google’s adjusted EPS MISSED estimates.

Jan 30, 2014 4:32pm EST  --  Report as abuse
bertanderson wrote:
As I mentioned before, companies like Google and Facebook have so much cash on hand they themselves can keep the market buoyed for a while regardless of their earnings and revenue. They will run out of money though when the true global problems reach everybody. The top people at Google and Facebook have voiced their opinions on several occasions that they don’t agree with how the government is run or the economic decisions they’ve made. They also don’t want to pay much tax that the gov’t can really use. I agree, what they invented is truly incredible and has changed the world but it is only a social media site and an internet search engine. As the earnings start to slow for the bricks and mortar companies, then we’ll see a real correction in the market and no one will be hanging around to support software companies that have P/E ratios in the nose bleeds.

Jan 30, 2014 7:09pm EST  --  Report as abuse
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