According to an eMarketer report, mobile advertising in the US increased 121% over the year in 2013. Compare this with the desktop advertising market growth, which reported a comparatively modest 2.3% growth in 2013. eMarketer projects that desktop advertising will decline 9.4% in 2014 compared with an 82.3% increase in mobile advertising.
Google’s (NASDAQ: GOOG) second quarter revenues grew 22% over the year to $16 billion, ahead of the analyst expectations of $15.6 billion. EPS of $6.08 was short of the market’s projections of $6.24 for the quarter. The miss in the earnings was attributed to the increase in costs related to promotion of new products and ventures and the continuing decline in advertising prices.
By segment, revenues from Google-owned sites grew 23% over the year to $10.94 billion and network revenues improved 7% to $3.42 billion. Other revenues grew 53% to $1.60 billion.
By region, revenues from outside the US accounted for $9.33 billion, accounting for 58% of the quarter’s revenues compared with 55% a year ago.
Google’s big worry has been the declining cost per click. During the quarter, paid clicks grew 25% over the year and 2% over the quarter, but the cost per click fell 6% over the year as the market continues to shift to lower priced mobile advertising.
As part of Google’s acquisition drive to enhance capabilities, this month, they announced the acquisition of music playlist app Songza. Terms of the deal were not disclosed, but analysts estimate the deal to be valued at $39 million. Songza is a music playlist app that helps prepare customized playlists of recommended songs. Analysts believe that with the acquisition, Google too will be able to offer curated music services that include personalized recommendations and playlists that are customized to even external conditions like weather, time, and activities. Songza’s financials are not known, but the company was earning revenues through advertising and had more than 5.5 million users at the end of the previous year.
Within mobile apps, Google also acquired Appurify for an undisclosed sum. Appurify’s apps help developers test for optimization of mobile apps and websites. The application operates on a freemium model and will be integrated with Google’s in-house testing service to strengthen the offering.
Last month, Google spent $500 million to acquire Mountain View-based Skybox Imaging. The deal will help Google’s satellite-based offerings such as Maps to keep them up-to-date. Skybox’s satellite services will also be helpful in expanding Google’s Loon project, which aims at providing Internet connections to remote places in the world. Besides their satellite capabilities, Skybox is also known for their data processing abilities that help turn satellite images into information that is useful for organizations.
Google’s Management Change
In a surprise move, Google announced the exit of their chief business officer Mr. Nikesh Arora. The longtime sales chief will be leaving the organization after nearly a decade to head Softbank subsidiary Softbank Internet and Media. For now, Omid Kordestani, senior advisor to Larry Page, will take over Nikesh Arora’s responsibilities.
Meanwhile, Google’s stock is trading at $595.08 with a market capitalization of $402 billion. It touched a high of $604.83 earlier this month. Google’s core business model search advertising is robust and extraordinarily profitable. They have used the profits to branch off into many different areas that have also been successful. The recent IBM-Apple partnership in the mobile enterprise arena is one they now need to think about how to counter. By and large, though, I continue to find Google a compelling company and stock.