Thursday, December 12, 2013
The Associated Press
SAN FRANCISCO - Google's latest quarterly results provided further proof that the Internet search leader is figuring out how to make more money as Web surfers migrate from personal computers to mobile devices.
The first-quarter numbers released Thursday show that a recent decline in Google's average ad prices is easing. That's an indication that marketers are starting to pay more for the ads that Google distributes to smartphones and tablet computers. The company expects that trend to continue as it changes its pricing system and as mobile devices emerge as the most effective way to reach consumers.
In another encouraging sign, the Motorola cellphone business was less of a burden than it has been since Google bought it for $12.4 billion nearly a year ago.
Meanwhile, Google's core operations, such as Internet search, maps, video and email, remain reliable moneymakers.
Those factors, coupled with an unusually low tax rate, produced earnings that exceeded analyst estimates and pleased investors. Google's stock gained $11.84, or 1.6 percent, to $777.75 in extended trading Thursday after the report came out.
Google's future success is likely to hinge on its ability to adjust to an accelerating shift from computers to mobile devices. Google has been among the companies leading the transition, thanks to the Android software that it has been giving away to device makers since 2008. Android is now the leading mobile operating system.
Even so, Google faces some challenges including the fact that mobile ads so far have fetched less money than those viewed on laptop and desktop computers.
Now, there are signs that marketers are starting to pay more for mobile ads. The first-quarter decrease in average ad prices was just 4 percent. By comparison, Google's average ad price fell by 6 percent during the final three months of last year and by 12 percent during last year's first quarter.
"I have been very pleased with the rate of progress so far," CEO Larry Page said during a conference call with analysts. "In today's multiscreen world, the opportunities are endless."
Google's ambitions sometimes seem boundless, too, as the Mountain View, Calif., company continually pushes the technological envelope. This week alone, Google unveiled plans to expand its effort to provide extraordinarily fast Internet access into Provo, Utah and began distributing test versions of Internet-connected glasses to programmers who paid $1,500 apiece for a device that is supposed to be the equivalent of a smartphone that can be worn on the head.
Those projects are examples why Google's spending often runs higher than investors prefer. The company's capital expenditures doubled from last year to $1.2 billion in the first quarter while research-and-development expenses rose 27 percent to $1.8 billion. Some of the increase was caused by Motorola, which Google didn't own in last year's first quarter.
By investing in new frontiers, Page believes Google will remain a fount of innovation. He doesn't want to allow Google's domination to foster a sense of complacency.