Google Inc.’s paid clicks on ads across its sites and those in its advertising network increased 14% during the fourth quarter of 2014 compared with the same period in 2013, but the increase fell short of analysts’ expectations of a 17% jump.
On Google sites alone, paid clicks were up 25%. The search giant does not release figures on clicks, only the percentage increase.
The average cost per click, which is the average price of ads across Google, decreased 3% for the quarter compared with the year-ago period. The decrease was more than the 1.5% decline anticipated by analysts, largely because consumers are increasingly clicking on smartphones, and advertisers pay less for mobile ads.
Google’s revenue increased 15.3% in the fourth quarter, to $18.10 billion from $15.71 billion in the same quarter of 2103. The growth shows the leading search engine is finding new ways to offer advertisers options they find appealing, Aaron Goldman, chief marketing officer for digital marketing firm Kenshoo Ltd., says.
“The pie is still growing, which is good. And then there are the dynamics within the pie,” Goldman says, noting that a lower cost per click means e-commerce merchants can get more traffic for each dollar spent.
Omid Kordestani, Google’s chief business officer, said in Thursday afternoon’s earnings conference call that Google continues to adapt its advertising business to reflect the reality that consumers access the Internet on a variety of devices, including smartphones and tablets as well as computers.
“Mobile is now a behavior, not a device, and it has a variety of unique characteristics,” Kordestani said. While it’s true not as many mobile customers click through and complete a purchase on a phone as on a PC, it’s essential for online retailers to reach consumers via their smartphones, he said.
In a Kenshoo 2014 holiday shopping season report, the cost per click on smartphone ads was 39 cents, while mobile’s conversion rate was 2.1%. Cost per click on a PC was 59 cents, and the conversion rate was 6.9%.
“You still want to be there anytime someone is looking for you, and it’s still an important click that you want to keep buying,” Goldman says.
Shawn Milne, managing director for Internet and interactive entertainment at investment firm Janney Capital Markets, says Google’s core ad growth remains solid, and costs per click are expected to rise in fiscal 2015 as mobile volume strengthens.
For the fourth quarter ended Dec. 31, Google also reported:
- Net income of $4.76 billion, an increase of 40.8% from $3.38 billion in the same quarter of 2013.
- Google’s traffic acquisition costs, which is what Google pays to web sites that host Google ads, rose to $3.62 billion, a 9.4% increase compared with $3.31 billion in the same quarter of 2013.
- Google-owned sites, such as its search engine and YouTube, generated $12.43 billion in revenue in the fourth quarter, up 18.0% from $10.53 billion in Q4 of 2013.
- Google network revenue, which it receives from clicks on ads it places on the web sites of other companies, including retailers’ sites, increased this quarter to $3.72 billion, up 5% from $3.52 billion in the year-ago period.
- Internationally, revenue for the fourth quarter was $10.23 billion, representing 56% of total quarterly revenue.
Google also reported the following 2014 annual results:
- Full-year revenue for 2014 was $66.00 billion, up 18.9% from $55.52 billion in 2013.
- Net income rose to $14.44 billion, up 11.8% from $12.92 billion in 2013.
- Google’s traffic acquisition costs for the year rose to $13.50 billion, a 9.2% increase compared with $12.26 billion in 2013.
- Revenue for Google-owned sites for all of 2014 was $45.09 billion, up 20.5% from $37.42 billion in 2013.
- Network revenue for the year was $13.97 billion, a 6.4% increase from $13.13 billion in 2013.
- International revenue for the year was $37.62 billion, a 23.2% increase $30.54 billion in 2013.