SAN FRANCISCO -- Stampedes of mobile consumers are shaking up Google's online advertising moneymaker.
People
are doing more and more of their Web searches on smartphones and
tablets, where advertisers pay Google lower rates for search ads than
for ads found through searching on desktop and laptop computers.
That
movement came to light in Google's earnings report on Thursday. The
cost-per-click rate that advertisers pay Google for ads discovered
through its search engine declined 15% from a year ago. That, along with
losses from its recently acquired Motorola Mobility unit, weighed on
Google's third-quarter financial results.
CEO Larry Page said on a
conference call that Google is in the midst of a mobile boom. "All of
this abundance causes disruption," he said in a hoarse voice. Page has
been on a hiatus from speaking engagements because he lost his voice and
was dealing with an undisclosed ailment.
Underscoring Google's
mobile transition, the search giant reported third-quarter net income
fell 20% from a year ago. The company missed both profit and sales
projections.
Google's financial report came early in a release
mishap from financial printer R.R. Donnelley that sent shares on a
roller-coaster ride. Google's stock ended the day down 8% at $695.
The
search giant reported net income of $2.18 billion compared with $2.73
billion in the same period a year ago. Revenue, less traffic acquisition
costs, came in at $11.3 billion, below the $11.9 billion expected by a
survey of analysts from Thomson Reuters.
Excluding costs, the
company's profit slid to $9.03 a share from $9.73 a share a year ago.
Wall Street analysts were forecasting earnings per share of $10.65.
Google
faces a similar problem to that of Facebook and Zynga. People are
quickly moving to mobile platforms where the companies aren't positioned
as well to make money as they are on the desktop.
"As they add
more and more Android devices and that mobile monetization is lower than
desktop monetization, you're going to see this trend," says HfS
Research analyst Jonathan Yarmis. A majority of the world's mobile
devices run on Google's Android operating system.
Google dominates
the mobile ad market in the U.S. The search company is forecast to snag
54.5% of the $2.61 billion market in 2012, according to researcher
eMarketer.
Page says the company is well-positioned to capture the
mobile migration of advertising budgets. "Today there are over half a
billion Android devices," he noted.
Another drag on Google
earnings: Its Motorola Mobility unit reported an operating loss of $151
million in the third quarter. Google bought the distressed handset
manufacturer last year for $12.5 billion.
USA Today