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Wednesday, 25 May 2016


Google shows hints of life like a newspaper

Google knows a thing or two about rapid shifts in technology usage. After all, the search giant has built its $300 billion market cap by effectively gutting the print world of its advertising dollars over the past decade. So it is somewhat surprising - and a potential source of Schadenfreude for those whose livelihoods were Googled - to see the group led by Larry Page fumbling with a market transition of its own.

The Mountain View monopoly failed to live up to the expectations of its investors in the second quarter of the year. Google reported earnings per share of $9.56, below the $10.83 that had been forecast by analysts polled by Thomson Reuters. Revenue was light too, coming in at $14.1 billion instead of the $14.35 billion that had been anticipated. Though Google famously eschews giving guidance to Wall Street, this is a rare miss.

As with any large company, there are many reasons. Most worrying for shareholders is the one that the dinosaurs of print can most sympathize with. Google butters its bread by selling clicks related to ads served on its sites and those of its network. For the sake of the analogy, think of these as newspaper ads. The more valuable a page becomes, the better for the publisher selling the space.

Yet in the second quarter that real estate declined in worth. Google says that average cost-per-click has fallen by 6 percent over the past year. And it fell 2 percent from the first quarter, implying an even greater annual decline. The reason: More people are using Google on their mobile devices. And a customer using a tiny screen on the go is worth less to advertisers than one sitting down in front of a computer.

Veterans of the incredible print disappearance of the 21st century, however, can’t yet delight in any delicious irony. Aggregate paid clicks at Google rose by 23 percent in the quarter from a year ago and by 4 percent from the first quarter. So while the value of Google’s pages may be declining, customers are reading many more of them.

The challenge for Google will be to manage this transition with more aplomb than its print predecessors - and with more reliability than it did in the latest quarter.


Additional reporting by Pierce Crosby

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Google reported second-quarter results short of Wall Street’s estimates as weakening prices for the Internet company’s ads and widening losses from its Motorola mobile phone business weighed on the bottom line.

Shares of Google, which had risen to all-time highs in recent weeks, were down more than 5 percent at $863 in after-hours trading on July 18, having earlier closed at $910.68 on the Nasdaq.

The average price of Google’s online ads decreased 6 percent year-on-year in the second quarter, compared with the first quarter’s 4 percent decrease, even as the overall number of Internet user clicks on Google ads increased 23 percent during the quarter.

Google, the world’s No. 1 Internet search engine, said net income in the quarter was $3.23 billion, or $9.54 per share, compared with $2.79 billion, or $8.42 per share, in the year-ago period. Excluding items, Google earned $9.56 per share, lower than the $10.78 expected by analysts, according to Thomson Reuters I/B/E/S.

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