Google gets a double whammy
San Francisco: Google Inc on Friday reported second-quarter results short of Wall Street’s estimates as weakening prices for the internet company’s ads and widening losses from its Motorola mobile phone business weighed on the bottom line.
The falling ad prices surprised analysts and investors, who expected recent changes to the web search company’s advertising system to help mitigate the effects of an industry-wide shift to mobile advertising.
Shares of Google, which had risen to all-time highs in recent weeks, slid roughly four per cent to $872.80 in after-hours trading on Thursday, having earlier closed at $910.68 on the Nasdaq.
Google’s business, like those of rivals Facebook Inc and Yahoo Inc, has been under pressure as more consumers access its online services on mobile devices such as smartphones and tablets, where advertising rates are lower than on PCs.
Earlier this year, Google changed the way marketers run ad campaigns on Google, blurring the distinction between ads destined for PCs and mobile ads, in a move that some analysts believed could help bolster Google’s overall ad prices.
That did not happen in the second quarter. “We’ve got to assume that maybe enhanced campaigns is not going to provide the pricing boost that a lot of people were expecting,” said JMP Securities analyst Ronald Josey, referring to a new ad policy program unveiled by Google.
The average price of Google’s online ads slid a larger-than-expected six per cent year-on-year in the second quarter, compared with the first quarter’s four percent decrease. One problem may be that consumers don’t click on mobile ads as often as they do on PCs, said BGC Partners analyst Colin Gillis.
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