Different perspectives on Google’s earnings
by Liz Hester
Google reported earnings Tuesday, and depending on which version of the story you read, you might come away with a different perspective on the search giant’s performance. There were several metrics to measure for the company, so it’s interesting to see how the major business papers covered the report.
The Wall Street Journal led with the fact that profit rose on increases in ad revenue. Here’s its take:
Google Inc. posted fourth-quarter results that reflected enduring strength in its core business and something of a rebound in online advertising prices, helping send the Internet company’s shares higher in late trading.
Google said Tuesday that its fourth-quarter profit improved 6.7% over the period last year, as the weight of recent, $12.4 billion acquisition Motorola Mobility lightened somewhat.
Still, analysts expressed some reservations about the online search firm’s increasing presence in lower-margin businesses such as Motorola’s mobile devices.
“The quarter is good, but it doesn’t change the framework with which we evaluate Google, which shows faster growth out of lower-margin parts of their business,” said Stifel Nicolaus analyst Jordan Rohan.
While the profit rise was downplayed in its story, the Financial Times cast even more doubt on the sustainability of the results.
The slide in Google’s advertising prices caused by the growing popularity of mobile internet use moderated in the final months of last year, helping it to top Wall Street’s forecasts for earnings and revenues in its latest quarter, according to figures released late on Tuesday.
However, the US internet company suffered another decline in the Motorola mobile hardware business it acquired last year and warned of the risk of large future losses as it spends at least another year sorting through Motorola’s old product pipeline.
The signs that Google’s core advertising business was showing more stability amid the shift to mobile contributed to a 5 per cent rise in its shares in after-market trading.
Larry Page, chief executive, warned that the company was in “uncharted territory” as it worked out how to make money from booming mobile internet use, but added: “I focus mainly on products and assume usage will follow our great products.”
He also said that Google was working on simplifying the systems used by its advertisers to make it easier for them to run their mobile campaigns.
Bloomberg had one of the more optimistic stories. Here are a few excerpts from its coverage.
Google Inc. (GOOG), owner of the world’s largest search engine, reported profit that topped analysts’ projections as advertisers boosted spending to reach consumers during an extendedholiday shopping season.
Fourth-quarter profit, excluding certain items, rose to $10.65 a share, Google said in a statement. Analysts had projected per-share earnings of $10.50, according to data compiled by Bloomberg.
Google gained after retailers poured money into online advertising and extended the gift-buying season. Total spending in the U.S. e-commerce industry jumped 14 percent during the last two months of 2012 as retailers began promoting Web deals earlier, according to ComScore Inc. That’s helping compensate as the company relies more on mobile advertising, which tends to be less lucrative than ads on traditional computers.
Rates for mobile ads can be about 55 percent less than for promotions on desktop machines, according to Covario Inc., an online marketing agency. Still, the decline in the average amount advertisers paid each time a user clicks on a promotion slowed. The so-called cost per click decreased 6 percent, following a 15 percent decline in the previous period. The total number of clicks advanced 24 percent, after a 33 percent increase in the third quarter.
Revenue, excluding sales passed on to partner sites, was $12.2 billion, compared with $12.4 billion projected by analysts. Sales from operations excluding the Motorola Home set- top box unit, which Google agreed to sell last month, were $14.4 billion.
The New York Times chose to focus on the mobile aspect of Google’s earnings.
Although Google is scrambling to meet consumers as they flock to mobile devices, the question is whether it is moving fast enough.
When Google announced its fourth-quarter earnings on Tuesday, investors were watching closely for positive signals of Google’s progress in the evolution to a mobile world.
There was some evidence that Google was making progress on a crucial challenge: a decrease in the price that advertisers pay Google each time someone clicks on an ad, known as cost per click. The trend has been driven by the increasing use of Google on mobile devices — where advertisers largely pay less for ads — at the expense of the desktop computer.
On Tuesday, Google said the price per click rose 2 percent from the previous quarter, though it was still 6 percent lower than in the year-ago quarter, making it the fifth consecutive quarter of year-over-year decline.
The earnings report was greeted warmly by investors in after-hours trading, though analysts emphasized that the results were mixed. The company exceeded their expectations on profit, but disappointed on revenue. That was at least in part because analysts are still figuring out how to account for Motorola Mobility, the struggling cellphone maker that Google acquired last year.
No matter which version you prefer, Google’s results were pretty good. It will be interesting to see in the coming quarters if it is able to continue the growth.