Google Inc.'s core Internet search advertising business is strong, but challenged by slowing growth, foreign-exchange headwinds and competition from Facebook Inc. and others. Still, its stock price rose about 3 percent in early trade this morning as the market took its fourth-quarter revenue and earnings-per-share misses yesterday in stride.
Here are 5 things to know about Google as the Mountain View company invests in its future:
1. Growth in Google's core Internet search advertising business is slowing, which contributed to its fourth-quarter revenue and EPS missing analysts' forecasts. The company's average cost-per-click — the amount advertisers pay Google for each ad click-through — fell about 3 percent in the fourth quarter compared with the same period a year earlier. That figure includes clicks on ads on Google sites and those of its network members. Cost-per-click for Google sites fell about 8 percent over the same period.
2. Yet Google's advertising revenue on mobile devices more than doubled in the quarter from a year earlier, its Chief Business Officer Omid Kordestani said yesterday during a conference call with analysts. Although the company doesn't break out the specific amount for mobile ad sales. "Mobile is now a behavior, not a device, and it has unique characteristics," Kordestani said. The point he was making is that people use screens interchangeably, and the company is trying to figure out how to get the mix of advertising right in mobile, the Wall Street Journal said in a live blog of the call. Kordestani said it took Google a while to develop the right format for desktop and that it will also take time to work out the best one for mobile.
3. Facebook and others are working hard to snatch digital advertising dollars away from Google, particularly on mobile devices. Although Google still holds a strong lead in mobile ads, these don't fetch as much money as ads on desktop computers. Google and Facebook are both working to persuade advertisers that mobile ads are more valuable than currently perceived. Facebook's Chief Operating Officer Sheryl Sandberg mentioned this week, following Facebook's earnings results, that the Menlo Park company is developing better measuring tools to demonstrate mobile ads' success and working to increase advertisers' return on investment in this space.
4. Google — as with Facebook and Apple — expects strong headwinds from currency-exchange volatility to continue, but says its hedging activities have succeeded in helping to protect it from some of the impact.
5. Google is spending heaps of cash on new data centers and even massive facilities in pricey Silicon Valley. The company said during its call with analysts that it's opportunistic in building for future growth, according to the WSJ live blog. For example, as our own commercial real estate reporter Nathan Donato-Weinstein reported last year, Google has bought property for substantial expansion in Redwood City.