(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.) (Refiles July 18 item to add dropped
word in Context News and harmonize style.)
By Rob Cox
NEW YORK, July 18 (Reuters Breakingviews) - Google (GOOG.O)
knows a thing or two about rapid shifts in technology usage.
After all, the search giant has built its $300 billion market
cap by effectively gutting the print world of its advertising
dollars over the past decade. So it is somewhat surprising - and
a potential source of Schadenfreude for those whose livelihoods
were Googled - to see the group led by Larry Page fumbling with
a market transition of its own.
The Mountain View monopoly failed to live up to the
expectations of its investors in the second quarter of the year.
Google reported earnings per share of $9.56, below the $10.83
that had been forecast by analysts polled by Thomson Reuters.
Revenue was light too, coming in at $14.1 billion instead of the
$14.35 billion that had been anticipated. Though Google famously
eschews giving guidance to Wall Street, this is a rare miss.
As with any large company, there are many reasons. Most
worrying for shareholders is the one that the dinosaurs of print
can most sympathize with. Google butters its bread by selling
clicks related to ads served on its sites and those of its
network. For the sake of the analogy, think of these as
newspaper ads. The more valuable a page becomes, the better for
the publisher selling the space.
Yet in the second quarter that real estate declined in
worth. Google says that average cost-per-click has fallen by 6
percent over the past year. And it fell 2 percent from the first
quarter, implying an even greater annual decline. The reason:
More people are using Google on their mobile devices. And a
customer using a tiny screen on the go is worth less to
advertisers than one sitting down in front of a computer.
Veterans of the incredible print disappearance of the 21st
century, however, can't yet delight in any delicious irony.
Aggregate paid clicks at Google rose by 23 percent in the
quarter from a year ago and by 4 percent from the first quarter.
So while the value of Google's pages may be declining, customers
are reading many more of them.
The challenge for Google will be to manage this transition
with more aplomb than its print predecessors - and with more
reliability than it did in the latest quarter.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Google 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.
- Shares of Google, which had risen to all-time highs in
recent weeks, were down more than 5 percent at $863 in
after-hours trading on July 18, having earlier closed at $910.68
on the Nasdaq.
- The average price of Google's online ads decreased 6
percent year-on-year in the second quarter, compared with the
first quarter's 4 percent decrease, even as the overall number
of Internet user clicks on Google ads increased 23 percent
during the quarter.
- Google, the world's No. 1 Internet search engine, said net
income in the quarter was $3.23 billion, or $9.54 per share,
compared with $2.79 billion, or $8.42 per share, in the year-ago
period. Excluding items, Google earned $9.56 per share, lower
than the $10.78 expected by analysts, according to Thomson
- Google Q2 results: r.reuters.com/cuh79t
- Reuters: Google quarterly results miss estimates, Motorola
Google reap [ID:nL3N0D64NY]
- For previous columns by the author, Reuters customers can
click on [COX/]
(Additional reporting by Pierce Crosby. Editing by Antony
Currie and Martin Langfield)
Keywords: BREAKINGVIEWS GOOGLE/
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