Google is still pulling in big money, as anyone would expect, however, according to its latest earnings report revealed on Thursday, the tech giant’s profitable business is beginning to slow.
The Mountain View company increased its revenue for the third quarter by 20 percent as compared to the same period of 2013 despite the fact that the cost per click (which represents the average price that Google receives each time an internet user clicks an advertisement) decreased 2 percent compared with the same period of last year.
It is true that the cost per click measurement has been continuously falling for the past years as more and more users begin spending more time on the internet via mobile phones or tablets, where ad placement can become tricky because of the smaller screens. Additionally, Google does not release separate figures for its mobile ad revenue and for its desktop ad revenue.
And because there has been nothing more profitable for Google as its original golden goose, investors aren’t as pleased with Google’s expansion beyond what its core search business represented. It is true that paid clicks on ads experienced a 17 percent increase as compared to the same period of last year and 2 percent from the second quarter, however, the rate of increase is on a slowing trend as analysts show (in the second quarter, the paid clicks on advertisements had increased 25 percent).
“Google’s core search business is the best Internet business model ever created,”
Jordan Rohan, Clearmeadow Partners founder, said.
“Every other business Google is in looks pedestrian by comparison.”
If one would look strictly at the figures, Google would seem to be doing particularly well: its revenue was $16,52 billion in the third quarter and its net revenue (the revenue that excludes payments made to advertising partners) was $13,17 billion (as compared to the $10,78 billion in the same period of 2013). The company’s net income increased 5.6 percent ($4.09 per share) and its profit was $6. 35 a share (the third quarter of 2013 had a $5.63 profit per share).
However, these earnings fall short of expectations. In fact, the tech giant’s stock went down more than i percent in after-hours trading.
In light of these issues, Google has attempted to persuade advertisers to invest more in mobile advertisements. But sadly, there’s one aspect that the company has overseen: Google has become the victim of its own success, as regulators now challenge its dominant market share in search and analysts point to the fact that the explosive smartphone growth has eroded Google’s advertisement prices because of less expensive mobile ads.