Mobile Ad Weakness Deflates Google Shares

Started by ReadWrite, Jul 19, 2013, 01:31 PM

ReadWrite

Microsoft isn't the only one getting smacked around by Wall Street today—Google is getting the stink eye too after reporting their 2Q earnings and missing analysts' marks, despite a 19% rise in revenue for the quarter.

Google shares were down as much as 5% in after-hour trading following a report of second-quarter net income of $3.23 billion compared with $2.79 billion a year ago. The overall revenue figure came in at $14.1 billion.

Analysts were looking for a net income figure of $3.6 billion and $14.4 billion in revenue for the quarter. And you know those analysts—even if you make some money, you miss their expectations, and boom, the hammer falls.

The main reason for Google's perceived weakness: less-than-spectacular mobile ad sales, a perennial tough nut to crack. For Google, it's a bit of a double whammy: there are signs that its desktop search business is slowing down, too.

Ads are regarded as a very soft form of revenue—subject to the whims of a fickle marketplace. And mobile ads are particularly hard because small screens and mobile use cases make them much less attractive to click. Mobile users, after all, are usually just that: mobile and in too much of a hurry to take time to click an ad.

Google's revision of its AdWords program may help: the enhanced campaigns that have been optional since February and will be mandatory on July 22, requires ad buyers to purchase ads for desktop and mobile platforms. This will ultimately raise the prices on ads for smartphones and tablets, because there will automatically be more demand for ads on those platforms.

For all its innovations with Glass and self-driving cars, at the end of the day, Google is still an advertising company, and they will have to live and die by that soft market unless they can completely remake themselves someday.

ReadWrite