© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
April 13, 2012 1:16 am
Google sought to shift Wall Street’s attention away from signs of deteriorating pricing in its advertising, as it reported earnings that topped Wall Street expectations for the first quarter of this year.
The latest three-month period saw the average cost-per-click, or the price that advertisers pay each time a user clicks on their ads on Google, fall by 12 per cent from a year before, the search company said on Thursday. That marked a further decline from the 7 per cent fall recorded in the preceding quarter, when Wall Street first became concerned about pricing trends.
However, the effects of lower prices were offset by a jump in the number of times users clicked on ads, with the number of paid clicks climbing by 39 per cent from the previous year – an increase from the 34 per cent rise of the preceding quarter.
For the three months to the end of March, Google reported net revenues of $8.14bn after deducting traffic acquisition costs, in line with Wall Street forecasts. Earnings per share on the pro forma basis analysts assess the company reached $10.08, up from $8.08 the year before and ahead of the $9.64 per share analysts had expected.
The shifting trends in Google’s advertising partly reflect a growing reliance on advertising on mobile devices and in emerging markets, where growth is fastest but prices are lower, the company said.
It also attributed the shifts to a number of other factors, including its efforts to weed out low-quality advertisers that sometimes offered to pay large amounts per click. The move had resulted in lower overall prices but had also brought more clicks as users developed greater confidence in the quality of the products and services being promoted, executives indicated.
As a result of these changes, Google’s cost-per-click and paid-click numbers – measures that have long been relied on by analysts as important indicators of its underlying health – “really do not reflect the fundamentals in our business,” said Patrick Pichette, chief financial officer.
The company’s shares remained largely unchanged in after-market trading, suggesting that investors have come to feel more comfortable about the changing dynamics of Google’s advertising business after the concern that greeted its last earnings report in January.
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in