Search and online advertising giant Google reported fourth-quarter revenue of $14.42 billion and $2.89 billion in income. Its revenue resulted in the company’s first $50 billion fiscal year, but left analysts scratching their heads on whether the company was a buy or sell.
Google’s Q4 revenue represented a jump of 36 percent for the company year to year. The fourth-quarter is usually the strongest quarter for Google and other online companies that depend on advertising, since spending is highest during the holiday season. Excluding payments to the company’s advertising partners, Google reported income of $11.34 billion.
Despite the massive growth in revenue and income, investors remain concerned over the drop in revenue due to an increase in mobile ads. Mobile ads traditionally bring in less Cost-per-Click (CPC) and Cost-per-Impression (CPM) than regular desktop ads. The New York Times, quoting Adobe, said that the Google’s share of searches from “desktop computers has fallen to 73 percent from 77 percent in the last six months, while the share of clicks on tablets and smartphones has increased to 27 percent from 23 percent.”
But while Google’s CPC and CPM rates overall fell for the fifth consecutive quarter, investors had some reason to cheer as mobile CPC/CPM rates went up slightly for the first time--likely a reason why investors reading the fine print snapped up Google’s shares today, sending its stock price up 5% at the time this article went to press.
Hardware Forgotten as Advertising Strength ImprovesInvestors seemed generally optimistic about its advertising earnings, meaning that Google’s growing dominance of the smartphone and tablet market with Android has become largely passe and a side note. That’s because despite Android leaping from strength to strength-- — Google gives the operating system away for free, hoping to use the mobile usage to drive people to its ads, which actually makes revenue.
Motorola Mobility, which Google acquired for its intellectual property, to defend Android, reported $1.51 billion in revenues, down 40 percent from $2.5 billion a year ago. Motorola’s losses amounted to $353 million, with an operating loss of $152 million, with Google CEO Larry Page and CFO Patrick Pitchette describing the unit as a “work in progress.” And even with its Nexus 4--demand for which has been ten times the number of units Google estimated--is reportedly sold only at a break-even price. And in addition to autonomous cars, Google co-founder Sergey Brin has been spotted out and about in New York subways sporting Google Glasses.
But investors likely don’t care too much about the expenses or small income from Google’s new hardware ventures, and as long as Google’s advertising revenues as strong, they are likely to forgive the search giant for its random bouts of blue-sky research.