Google delivers 3Q letdown early, stock plummets
Google’s ad revenue rose 16 percent from the same time last year, the slowest pace in three years. The company’s ad revenue had climbed by at least 21 percent in each of the previous 10 quarters.
Advertising accounts for 77 percent of Google’s revenue. The rest comes from Motorola Mobility and other products, such as Google’s recently released Nexus 7 tablet computer.
As has been the case for the past year, the average prices companies pay Google for ads appearing alongside search results also fell. The year-over-year decline for advertiser’s ‘‘cost-per-click’’ on Google’s ads declined 15 percent from the same time last year.
The decelerating growth in ad revenue is likely being driven by the growing use of smartphones and tablet computers to access the Internet.
The ads are more difficult to see on smartphones, in particular, so marketers aren’t willing to pay as much for those commercial messages as they do for ads that are seen by people on personal computers. And people relying on mobile devices tend to use specially designed applications that so far haven’t been set up to show as many ads as can be seen in Web browsers. People using mobile apps also have less reason to conduct searches on Google, depriving the company of opportunities to show ads.
‘‘I am not at all worried about this because I think we are better positioned than most companies,’’ Page assured analysts.
Google is reaping more revenue from the rapidly growing mobile market, largely because of its Android software than now powers more than 500 million smartphones and tablet computers. The company gives away Android to device makers, but the software is fruitful for Google because it’s designed to drive up more traffic to its search engine and other services that show ads.
Page said the mobile market is now generating about $8 billion in annual revenue, including sales of applications, video, books and music in its Play store. Not all of those, sales, though, are recorded in Google’s books because most of the money goes to developers, studios and publishers. A year ago, Google said the mobile market was generating about $2.5 billion in annual revenue, but that figure consisted entirely of ads, so it’s not an apples-to-apples comparison to the $8 billion.