Google's earnings fall short of predictions for fifth consecutive quarter
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Version 0 of 1. Google has gotten into the habit of missing analysts’ earnings targets, frustrating investors who believe the online search leader would be more profitable if it weren’t pouring so much money into far-flung projects such as internet-connected eyewear and driverless cars. The latest letdown came Thursday with the release of Google’s fourth-quarter earnings report. The earnings were well below analysts’ predictions, marking the fifth consecutive quarter that Google hasn’t cleared a key hurdle for publicly held companies. The Mountain View, California-based company earned $4.8bn, or $6.91 per share, a 41% increase over the same period in 2013. If not for certain expenses and gains, Google said it would have earned $6.88 per share. Analysts, on average, had forecast earnings of $7.12 per share, according to FactSet. Google’s revenue for the period covering the holiday shopping season rose 15%, to $18.1bn. After subtracting ad commissions, revenue stood at $14.5bn – nearly $250m below analysts’ expectations. Investors expressed dismay as Google’s stock sank $10.31, or 2%, to $502.92 in extended trading. Even before that sell-off, the shares had dropped by 8% from where they stood just 13 months ago. The downturn has primarily been driven by two factors: Google’s steadily rising expenses, as well as the challenges facing the company’s main digital advertising business as consumers increasingly rely on smartphones instead of desktop and laptop computers to run searches and browse digital content. Ad prices have consequently sagged, as marketers aren’t willing to pay as much to pitch consumers who are squinting at the smaller screens on smartphones, an issue that cropped up again during the final three months of last year. Google registered a 3% decline in the average price of the ads that appear alongside its search results and other online content, a measure known as “cost per click”. It’s the 13th consecutive quarter that Google’s cost-per-click has fallen from the previous year. The desktop-to-mobile transition also unleashed a flood of applications that make it easier for people to go directly to the digital content that they want instead of Googling for it. People are also searching within apps once they’re in them, relying on services such as Amazon to find products or Yelp to find restaurants. That trend may help explain why the revenue-generating clicks on Google’s ads have been growing at a slower rate. The volume of clicks is important because Google bills advertisers when people click on a promotional link. Google’s paid clicks during the fourth quarter rose 14% from the same time in 2013. That compares with an increase of 17% in the third quarter and 25% in the second quarter. Google could still be making more money, if it added fewer workers to its payroll and reined in its spending on far-out technology. But CEO Larry Page believes Google needs to continue taking risks and making big bets on ambitious ideas that he calls “moonshots” in an effort to open future moneymaking opportunities and perhaps turn the world into a better place. Page, who, with fellow co-founder Sergey Brin, is Google’s controlling shareholder, warned investors when Google went public in 2004 that the company would continually invest for the long term instead of trying to make as much money as possible from one quarter to the next. Google also has steadfastly refused to give any clue about its internal earnings projections, making it more difficult for analysts to make their own educated guesses. |