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Google struggling with mobile

  • 19 July 2013
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  • Published in Market

Google is struggling to capitalise on the mobile advertising market, after its second quarter financial results missed market expectations.

The Mountain View-based company today reported second-quarter results that missed analysts’ expectations for revenue and profit, as it continues to battle with declining desktop search business while ad prices continue to fall.

Google’s share price has risen 27% this year, but shares were sent 5% lower in the hours following the press conference.

Despite CEO Larry Page describing the results as an "amazing performance for a company that is yet to celebrate its 15th birthday", analysts weren't convinced, and concerns remain around cost-per-click prices that Google charges its advertisers.

Google reported revenue of more than US$14 billion for its second quarter, showing investors a 19% increase from the same quarter last year, while its net income for the second quarter was $3.23 billion, compared to $2.79 billion in the second quarter of 2012.

The $14.11 billion in revenue, however, missed Wall Street's expectations of $14.41 billion.

"The shift from one screen to multiple screens and mobility creates tremendous opportunity for Google. With more devices, more information, and more activity online than ever, the potential to improve people's lives even more is immense," CEO Larry Page said in a press release.

Colin W. Gillis, a technology analyst at BGC Partners, wrote a haiku to the New York Times before the earnings announcement: “The results should be/ pretty as a picture to/ justify the stock.”

This wasn't the case, however.

“One of the reasons why people like Google is you can look forward and see what they’re doing with Glass and laying fiber and driverless cars and Chrome, chasing after new revenue streams,” Mr. Gillis told the newspaper.

“But those are still pretty far away. Google’s core business is all about advertising and clicks, and the core business is absolutely maturing.”

Mobile ads, he added, are inexpensive yet “overpriced because the conversion rates are so low.”

“It’s still too hard to transact on a phone,” Mr. Gillis said.

Some big numbers still came from the report, some of which were positive. Revenue for Google-owned sites was $8.87 billion, which accounts accounts for 68% of its total revenues. This is an 18% increase from Q2 of 2012, which was reported as being $7.54 billion.

Google's partner sites generated $3.19 billion in revenues, which accounted for 24% of Google's total revenues and was a 7% increase from 2012, which was $2.98 billion.

Total advertising revenue jumped 15% from $11.902 billion in Q2 of 2012, to $12.061 billion in Q2 2013.

View the full transcript of the conference for yourself here.


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