Google misses profit forecasts again, but paid clicks surged 25 percent in the June ending quarter, leading to higher-than-anticipated quarterly sales of nearly $16 billion. Conway G. Gittens reports.
Driverless cars...wearable technology...mobile software...and robotics...all make flashy headlines, but at the end of the day, search and online advertising is where Google rakes in the dough. The total number of paid clicks surged 25 percent last quarter, which made up for a modest drop in the average price paid for each click. Independent tech analyst Santosh Rao: SOUNDBITE: SANTOSH RAO, INDEPENDENT TECH ANALYST (ENGLISH) SAYING: "As advertising is moving from desktop to mobile, the cost-per-click is lower, so I think that transition is going on. The silver lining in this whole report is that last quarter it was down nine percent year-over-year and this quarter it is down six percent, so it's a net improvement. So I would say it is stabilizing and it is growing. Pretty soon you will see the gap between desktop and mobile advertising revenues - the gap closing in." Despite that gap, total revenues jumped to nearly 16 billion dollars, which was stronger than anticipated. Profits, however, failed to meet expectations for the sixth time in nine quarters. Rao blames the weaker number on higher taxes, since on first blush sales and marketing expenses were no worse than they were previously. And while foreign exchange also played a negative role, international sales at nearly 60 percent of all revenues made up for that. SOUNDBITE: SANTOSH RAO, INDEPENDENT TECH ANALYST (ENGLISH) SAYING: "In fact, I would say that's a positive because that's where the growth area is. Android - Google is adding about 1.2 million Android devices every day worldwide and that's a good thing. So you would expect international revenues to grow and you want that to grow because the Western markets are kind of saturated on a relative basis. That's the next growth area. They are doing fine." Shares of Google shot higher in after-hours trade but are quite the underperformer - only up 3-1/2 percent year-to-date compared to the Nasdaq 100 which is up roughly eight percent. Investors not worried about a management shake-up as the Chief Business Officer leaves for a spot at Japan's Softbank.