Google's 1st Quarter Earnings Jump Past Wall Street Expectations
MOUNTAIN VIEW (CBS/AP) - Google's latest quarterly results provided further proof that the Internet search leader is figuring out how to make more money as Web surfers migrate from personal computers to mobile devices.
The first-quarter numbers released Thursday show that a recent decline in Google's average ad prices is easing. That's an indication that marketers are starting to pay more for the ads that Google distributes to smartphones and tablet computers.
Mobile ads so far have fetched less money than those viewed on the larger screens of laptop and desktop computers. Google's average price, or the "cost per click" to advertisers, has fallen from the previous year in six consecutive quarters, including the opening three months of the year.
But the latest decrease in average ad prices was just 4 percent. By comparison, Google's average ad price fell by 6 percent during the final three months of last year and by 12 percent during last year's first quarter.
Google is a good way to monitor the health of digital commerce because it runs the Internet's largest advertising network and is now a major player in the mobile computing market. It's also one of the world's most powerful companies, so what happens to it can affect millions of people and businesses.
Google executives have insisted that advertisers eventually will pay more to sell things on mobile devices as people use more and more of them. To help speed the transition, Google is changing the way it sells ads to prod more marketers into buying spots on mobile devices at the same time they plan campaigns aimed at PCs. That switch is scheduled to take effect this summer.
"I have been very pleased with the rate of progress so far," CEO Larry Page said during a conference call with analysts. "In today's multiscreen world, the opportunities are endless."
Google Inc. earned $3.3 billion, or $9.94 per share, during the opening three months of the year. That was a 16 percent increase from $2.9 billion, or $8.75 per share, last year.
If not for certain expenses, Google said it would have earned $11.58 per share. That figure exceeded the average earnings estimate of $10.65 per share among analysts surveyed by FactSet.
Revenue climbed 31 percent from last year to $14 billion.
After subtracting advertising commissions, Google's revenue totaled $11 billion - about $335 million below analyst estimates.
Google's stock increased $7.05, or nearly 1 percent, to $772.96 in extended trading after the numbers came out.
Google has been growing at an impressive clip for a company of its size. Its ability to keep growing has given the company a market value of more than $250 billion, second only to Apple Inc. among technology companies.
Yet it faces competition with Facebook Inc. for ad dollars and attention. For a time, Facebook's popularity had people worried that it would eventually become a more important advertising vehicle than Google's search engine.
Google has countered that by establishing its own social network, Google Plus.
It also makes the most widely used smartphone operating system, Android. That gives the company channels for sending ads to mobile phone users, through built-in Google apps such as YouTube, maps and search. It is Facebook that has responded to Google's strengths in mobile advertising: Facebook took advantage of Android's openness and release a new app this month to make its social network front and center on phones.
Google dominates the mobile search market with 93 percent of U.S. mobile search advertising dollars, according to eMarketer. Facebook is at No. 2, ahead of online music service Pandora Inc. and Twitter. EMarketer expects U.S. mobile ad spending to grow 77 percent this year to $7.29 billion, from $4.11 billion last year.
(Copyright 2013 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
