Google reported earnings last Thursday afternoon, hours before the planned release (due to a
glitch). Shares plunged as a result of earnings missing analyst estimates
significantly. After the earnings announcement, shares fell 8%, trading was
halted shortly after the announcement at Google's request.
Among many issues, profits slid 20% from a year earlier to
$2.18 billion, or $6.53 a share. Revenue rose 45% to $14.1 billion, thanks to
the incorporation of Google's new Motorola hardware unit. At the crux of
Google's profit slide was the growth rate of its biggest and most profitable
revenue engine: ads on its Web-search engine and video site YouTube. The growth
rate of those ad sales has steadily dropped since mid-2011. In the latest
quarter, sales of the ads rose 15%, but that was down from 39% growth a year
ago.
The growth rate for such ads fell not because advertisers
were buying fewer of the ads (Google sold 33% more ads in the third quarter).
But the average price paid by Web-search advertisers to Google per click
dropped by 15% in the third quarter. According to wall street analysts, the
decline in prices for ads was the shift by marketers toward mobile ads. Mobile
ads cost less than desktop ads, therefore, this change is hurting Google.
It seems that advertisers aren’t really willing to pay big
bucks for Mobile; there isn’t a lot of buying behavior on smart phones for
markets to invest yet. Some analysts predict the price differential will be
minimal by the end of next year.
To conclude IBM, Intel, Microsoft, Google all had
disappointing Q3 results. The economy on the whole and the tech industry is in
an important juncture. There are a lot of macroeconomic issues to be resolved,
namely (1) the elections, (2) Europe and (3) the fiscal cliff. Tech spending
and the overall economy should see positive signs once these issues can be
resolved.
No comments:
Post a Comment