Google's second-quarter revenue tops estimates on robust ad sales

PUBLISHED : Saturday, 19 July, 2014, 1:58am
UPDATED : Saturday, 19 July, 2014, 1:58am

Google's sales exceeded estimates in the second quarter as the company sold more advertising alongside web-search results.

Revenue, excluding sales passed on to partners, was US$12.7 billion, the company said. That beat the average projection of analysts for US$12.3 billion.

Google chief executive Larry Page is adding new features in mobile, video and web services to boost user traffic and attract marketers as he seeks to bolster Google's main ad business. As a result, the number of clicks on ads on YouTube, search and other Google sites increased 33 per cent in the latest quarter, making up for a decline in ad prices. Since Google gets paid each time someone clicks on an advertised link, higher volumes result in higher revenue.

"They're the largest player, and they're gaining share," said Youssef Squali, an analyst at Cantor Fitzgerald, who rates the stock a buy. "It was a very good quarter," he added.

Google shares climbed as much as 3 per cent in extended trading. Net income, including from Motorola Mobility, which is being sold to Lenovo Group, rose to US$3.42 billion during the second quarter, from US$3.23 billion a year earlier.

Google also said chief business officer Nikesh Arora is stepping down to become vice-chairman of SoftBank Corp and chie executive of SoftBank Internet and Media. Omid Kordestani, who helped craft Google's business model and was a senior adviser to the company, will take over Arora's role, Google said. Arora joined before the company's initial public offering and was instrumental in building Google's search-ad service.

Second-quarter profit excluding certain items was US$6.08 a share, compared with the average analyst estimate for US$6.24. While the biggest web search company is getting less money for marketing spots, where the average price for an ad declined 6 per cent, the expansion efforts helped push up the number of clicks on promotions.

Ad prices are falling as smartphones encourage users to bypass Google's search services and instead go directly to applications to find information. By 2016, Google's share of the US mobile-search market is projected to fall to 64 per cent from 83 per cent in 2012, according to eMarketer.

In order to tap into new sources of revenue, Google introduced a service last year called enhanced campaigns, prompting marketers to funnel more of their spending to wireless devices. The company also has been pushing retailers to spend more on product listings that show off wares with pictures and pricing.

The company ramped up hiring during the quarter, adding more than 2,000 employees, pushing headcount to more than 52,000. Capital expenditures were US$2.65 billion in the third quarter, up from US$2.35 billion in the prior quarter.