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Published On: Thu, Jan 24th, 2013

Google delivers stronger than expected quarterly results

googleThe earnings season is upon us Google is seen to beat market estimates.

Riding on the back of increased advertising revenues, Google proved yet again that it has the resilience and business depth to tide over the recessionary waves. Considering the fact that the current economic downturn has taken a heavy toll on many companies and their earnings, Google’s achievement is indeed surprising.

Further, the fact that analysts and market experts were expecting a decline in the quarter-on-quarter profit, which instead rose sharply, means that Google’s business model is working.

Google Inc. (GOOG) has announced that the net profit for the final three months of 2012 was $2.89bn (£1.83bn) which equates to a 12 month increase from the year before.  Revenues also jumped by more than a third to an unexpected $14.4 bn.

The other aspect of the results was that Google’s gamble as far as e-commerce and its foray into mobile ads is working.

The e-commerce segment with its Google Wallet and other transactional options pushed the company towards declaring higher profits.

Turning to the ad revenues, the best part of the results were that Google managed to outperform estimates even in the face of decreased “cost per click” numbers. To put matters in perspective, the cost per click is the number that web companies cite when advertisers want to advertise with them. Considering the fact that this number has been under pressure ever since the downturn and further accentuated by the fact that advertisers are reluctant to spend on the mobile platform, Google has indeed bucked the trend.

What makes this achievement even more notable is that the rates for mobile ads are typically 55 percent lower than rates for web content. Hence, Google can be thought to have outmaneuvered the tricky turns of mobile advertising. Moreover, not many advertisers are willing to spend on the mobile platform considering that the space for ads is limited. The point to be noted is that Google managed to slow down the decline in mobile ads and ensured that it stays in the hunt in the mobile space.

Further, Google has just about managed to tap into the increasing incidence of advertising on the web with the spurt in ecommerce transactions in this medium. For instance, many advertisers are hedging their bets about whether to continue with the web ads or migrate to Android and Mac OS based ads given the fact that the mobile space is the happening segment. To the relief of Google’s senior management, the company has stuck to its portfolio of offerings and has turned the corner in this quarter.

Finally, Google has lived up to its reputation as a tough cookie and the results just announced have cemented its place in the online and mobile segments.

When you Google something the next time, pay close attention to the ads and the banners that keep popping up. You might just discover some nuggets of how the company manages its revenues with the information that you get about the ads and how users respond to them. Google’s results have enlivened the “winter of discontent” that had set in the US after the gloomy economic data from many aother companies.

Google closed on Wednesday at 741.50, not far off its 52 week high 0f 774.38.

 google-chart

 

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.

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