Google's mobile strategy shows weakness as net income, CPCs drop
By Chantal Tode
October 19, 2012
Google’s net income was down and CPCs took another drop in the third quarter, highlighting several weaknesses in the company’s mobile strategy.
Going forward, Google appears to be pinning its hopes on creating a cohesive marketing offering for brands trying to reach consumers across multiple screens. However, at least one industry executive thinks Google should be paying closer attention to mobile apps.
“All this abundance causes disruption and it also creates amazing opportunity” said Larry Page, CEO of Google, Mountain View, CA, during a conference call with analysts to discuss the results.
“Google is super-well placed to take advantage of these disruptive opportunities,” he said. “Why? Because our search query volumes have grown this quarter as measured year-over-year and we are seeing tremendous innovation in advertising, which I believe will help monetize mobile queries more effectively than desktop today.
“Our mobile monetization per query is already a significant fraction compared to desktop. As we transition from one screen to multiple screens, Google has enormous opportunity to innovate and drive ever higher monetization just like search in 2000.”
CPCs down again
In the third quarter, Google’s average cost per click decreased three percent compared with the previous quarter and 15 percent compared with the same period a year ago, driven in part by the growth in lower-cost mobile ads.
At the same time, Motorola Mobility is cutting into Google’s performance despite layoffs and other cuts, with the division losing $527 million in the quarter.
Google also reported net income was down and totaled $2.18 billion, or $6.53 per share, in the third quarter, down from $2.73 billion, or $8.33 per share, in the same period a year ago. Revenue in the third quarter, including from Motorola Mobility, totaled $14.1 billion.
“The news comes as no huge surprise, Google is currently missing out on more than 90 percent of mobile ad strategies that use in-app advertising as their primary mobile advertising approach, it needs to find a way to quickly become app centric,” said Ash Kumar, founder and CEO of TapSense, San Francisco.
“Consumer app adoption is at an all-time high and Google’s continued focus on Web browser pages and search via its PC-centric approach is quickly becoming obsolete – today’s report is a clear indicator of that,” he said.
“We see less than 1O percent of our customers using mobile Web as part of their mobile strategy and Google’s approach is now out of date”
Earlier in the day, a mishap resulted in Google filing its earnings report with the Securities and Exchange Commission several hours earlier than scheduled. Because of the disappointing results, the company’s stock dropped sharply after the report was filed, with the Nasdaq halting trading in Google’s shares at one point.
At one point, shares were down more than nine percent.
$8B mobile run rate
The company said that its run rate for mobile is now over $8 billion compared to $2.5 billion a year ago. However, Google has changed how it calculates the run rate to also include the mobile revenue it generates from consumers paying for content and apps on Google Play.
Google also reported that 1.3 million Android devices are being activated every day.
Going forward, Google pointed to the rise of multiscreen consumers and its opportunities to allow marketers to run common campaigns across mobile, video, search and display as a cohesive solution.
An ongoing issue for Google is the dropping prices for clicks, which is being driven in part by the growth in mobile ads, which typically lost less.
The decline in CPCs for the third quarter was bigger than had been expected by analysts.
However, click volume continues to grow and was up six percent compared with the previous quarter and 33 percent compared with the same period a year ago.
“I think that Google has a significant challenge around monetizing the mobile query,” said Brian Kaminski, president at iProspect, Boston. “They don’t have a volume issue but they are still struggling to successfully monetize that.
“Mobile queries continue to become a larger percentage of overall queries,” he said. “But the average CPC – we are still going to see pretty wild gaps in terms of desktop CPCs vs. mobile.
“If they can more aggressively monetize the rising tide of mobile queries, we are going to see some financial results that are going to blow everyone away.”
Chantal Tode is associate editor on Mobile Marketer, New York
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