According to the Interactive Advertising Bureau (IAB), for the first half of the previous year, internet advertising sales grew 18% over the year to $20.1 billion. Mobile advertising continues to report strong growth with revenues from the segment growing 145% to $3 billion. Digital video advertising grew 24% to $1.3 billion in the first half of 2013 while search revenues grew 7% to $8.7 billion. Display-related advertising revenues were up 30% to $6.1 billion.
Online search giant, Google’s (NASDAQ: GOOG) fourth quarter revenues grew 17% over the year to $16.86 billion, ahead of the analyst expectations of $16.76 billion. EPS of $12.01 fell short of the market’s projections of $12.29 for the quarter.
Revenues from Google’s sites grew 67% to $10.55 billion and revenues from partner sites grew 23% to $3.52 billion. Aggregate paid clicks grew 31% over the year while average cost per click fell 11% during the same period. The declining cost per click reflects the continuing shift to mobile advertising which commands a lower price.
Overall ad sales continued to be impressive as their Enhanced Ad Program is helping brand advertisers analyze the best advertising strategy by delivering analysis on conversion rates across devices. As part of their continued innovation in advertising, they are investing in building improved engagement-driven ads across the web. During the quarter, they also enabled Google Display Network which allows advertisers to buy ads only when the video is viewed.
Google’s Portfolio Realignment
In a welcome move, Google agreed to sell their mobility business to Chinese PC Maker, Lenovo, for an estimated $2.91 billion. Google had purchased the business from Motorola in 2012 for $12.5 billion. Since its purchase, Google has revamped the phone offerings that the unit had to offer, but that has done little to improve their sales. According to a recent IDC report, Motorola Mobility’s smartphones account for a mere 1% of the global smartphone market share. Additionally, Google’s entry into the phone hardware market was hurting its relationship with other phone manufacturers who were relying on Android OS. Add to that the unit was also one of the few loss making entities for Google.
But if the move was expected to help Google reduce its focus on hardware, that is not happening. Recently, they announced a $3.2 billion acquisition of connected device maker, Nest Labs. Nest Labs is known for their smart home devices such as thermostats and smoke detectors that can be programmed and connected with smartphones. Their biggest product is the Nest Thermostat which uses past trend to automatically manage home temperature settings. The acquisition will help Google grow in the connected home business. According to GSMA, the market for connected home goods is estimated to be worth $10 billion this year and is projected to grow to $44 billion by the year 2017. They had initially ventured into the market with little success when they launched Android@HomePlatform that let users connect with their home devices through Android-based smartphones. The platform did not generate the interest Google sought.
The market is very pleased with Google’s stock which is trading at $1,180.97 with a market capitalization of $395.34 billion. It recorded a new life high of $1,186.54 at the end of the previous month.