Investors like what they’re hearing from Google, despite a sickly-sounding Larry Page. The Google CEO argued on Tuesday’s earnings call that mobile won’t hinder his company’s core ad business because distinctions between devices are becoming moot.
After-hours traders sent Google shares up more than 5 percent late Tuesday afternoon after the company beat Wall Street expectations for the quarter.
Money poured into Google’s core advertising business as holiday shoppers hunted for gifts. Google Chief Business Officer Nikesh Arora said Google’s top 25 advertisers are spending an average of $150 million per year. Election spending on Google quintupled in 2012 compared to four years earlier, Arora said during the call, adding that in 9 of 11 “top Senate races … the candidate who spent more with Google was elected.” He also said that Psy, whose “Gagnam Style” video topped 1 billion views on YouTube, made $8 million on YouTube advertising alone.
But the most important number for the quarter may be the slowing decline in the “cost-per-click” for ads served on Google and on sites on its ad network. Cost-per-click rates fell by double-digit percentages each of the first three quarters of Google’s 2012 fiscal year. This past quarter, the drop shrank to a six-percent decline compared to the same period last year, while the cost-per-click actually rose by 2 percent since the last quarter.
Analysts have blamed the steep plunge in the value of Google’s ads, paradoxically, on the company’s success at driving the smartphone revolution. Mobile ads simply aren’t worth as much on smartphones, since users just don’t respond to them as much. Android, the world’s most popular smartphone operating system, puts Google’s ad-supported ecosystem into more hands, but at the same time that spread is diluting those ads’ value.
Arora said on the call that Google has implemented a new policy to reduce the number of ads displayed. He and Page said the decision was driven by a desire to improve the user experience by cutting back on too many ads. But the move would also seem to have the effect of cutting back on ad inventory, which could help shore up the value of individual ads even as more ads are served overall.
As for Page, he said he believes that dollars for mobile ads could as likely as not top the spending on desktop. He pointed to handsets like Google’s own Nexus 4 and other “modern” smartphones that he said render the distinctions among platforms and form factors irrelevant.
“We should be designing for the kind of mobile phones that we have right now that are state of the art,” Page said. “Those experiences should work on all devices pretty well.”
If that comes to pass, then the logical conclusion to draw would be that users would respond to ads in a similar way, regardless of what device they’re using. But Page also wasn’t willing to stake too much on predicting the future, calling the spread of mobile technology the most rapid period of technological change since the dawn of the personal computer.
“We live in uncharted territory,” he said.
Google Ad Bleeding Slows as Larry Page Dismisses Mobile Fears
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Google Ad Bleeding Slows as Larry Page Dismisses Mobile Fears
