Google puts positive spin on weak results

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Google puts positive spin on weak results

Steve Bell

Google's quarterly results disappointed analysts who marked the stock down which in turn led to a huge sell off and temporary suspension of trading in its shares as the value plunged by almost 10 percent. However, Larry Page, the company's CEO unsurprisingly put a positive spin on the figures and said the company has 'enormous opportunities' for growth and the quarter had been strong.

For the quarter ended September 2012, the online behemoth, chalked up revenues of $14.10 billion a 45 percent increase on the same period the previous year. However, when fees were paid to its advertising partners revenue stood at $11.33bn. Analysts expected this figure to be $11.86bn. The difference led to a panicked sell-off before trading was temporarily suspended.

The difference was attributed to increased costs and weaker ad prices. For example, costs rose to $3.78bn compared to $1.17bn for the same period the previous year. These higher costs included data centre operating expenses, content acquisition costs and credit card processing charges as well as amortization of intangible assets. The fees that Google pays to partners also increased from $2.21bn to $2.77bn.

Page downplayed the results and emphasised the potential for growth particularly in mobile advertising.  Referring to the growing popularity of smartphones and tablet PCs he said the opportunities for innovation, and consequently increasing revenues, are great.

He cited the company's $8bn annual run rate of mobile related revenue as an example. This figure consists of mainly ad sales but also includes revenue from application sales on the company's Play store and content sales for books, films and music. 

The challenge the company faces is how to advertise effectively on mobile phone screens where there is less space for the type of advertising Google has built its empire on. Page maintains the company will successfully address this challenge.


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