Google’s 3Q earnings rise 36 percent, stock surges
SAN FRANCISCO – Google’s third-quarter results may have proven that a deepening decline in the Internet search leader’s average ad prices matters less than how frequently people are clicking on the commercial pitches.
The numbers released Thursday impressed investors who had been fretting about a downturn in Google’s ad prices that began two years ago. Those concerns evaporated, at least temporarily, with a third-quarter performance that exceeded the analyst projections steering Wall Street.
Google’s ad prices are still sagging as marketers pay less for commercial pitches on mobile devices, but the number of revenue-generating clicks on those ads is rising at a much faster clip.
The equation resulted in a 36 percent increase in Google’s earnings for the three months ending in September.
Google’s stock surged 8 percent to $959 in extended trading after the report came out. That leaves it poised to reach an all-time high in Friday’s regular trading session.
The robust rally represents an abrupt about-face. As the overall stock market rose, Google’s shares had slipped slightly during the past three months. The reason: Google’s previous quarterly report in mid-July revealed the deterioration in the company’s ad prices was getting worse.
Google’s average ad price has now declined from the prior year in each of the last eight quarters, primarily because advertisers aren’t yet paying as much for mobile ads because the screens on smartphones and tablet computers are smaller than those on laptop and desktop computers.
As more people rely on mobile devices to connect to Google’s search engine and other services, it’s driving down the company’s average ad price, or “cost per click.”
In Google’s latest quarter, that measure fell 8 percent from last year. That was worse than the 6 percent drop in the previous quarter.
But the number of so-called “paid clicks” on Google’s ads helped offset the lower prices in the third quarter. The clicking volume increased 26 percent from last year, an indication that Google’s data analysis is doing a good job matching ads with the interests of its services’ users.
Google Inc. earned nearly $3 billion, or $8.75 per share, during the three months ending in September. That compared to income of $2.2 billion, or $6.53 per share, at the same time last year.