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Google Q4 Results Up Despite Continued Ad Price Decline - Page Says Price Will Recover

Tech stocks are looking a lot sunnier today than they have in a while. IBM posted some good, if not impressive results earlier, now it’s the time for Google, which also seems to have had a good fourth quarter despite a fall-off in digital ad prices as more people are using smaller tablet and smartphone screens, and the costs of moving into device manufacturing through Motorola.

Google Q4 Figures

In fact, Google’s results and the general feel-good factor vis-à-vis technology after the fist day of the reporting season has seen Google stocks rise by 5% after it reported ad revenues of US$ 12.1 billion, up 19% on the same period last year.

But there have been expenses, and overall Google’s net revenues hit US$ 9.83 billion up from US$ 8.13 billion for the same period last year. This means profits of US$ 2.89 billion or compared with US$ 2.71 billion for the same quarter in 2011.

Consolidated revenue — which includes its Motorola Mobility mobile phone business — was US$ 14.42 billion.

It seems that the holiday shopping season really filled the Google coffers, producing more profit during this season than it has ever done during the same period since it went public in 2004.

Ad Price Continues To Fall

And this despite the fact that there has been a notable shift in the way advertisers are advertising, as they slowly get to grips with the new tablet frenzy in the consumer electronics market and start trying to sell their wares to a public whose access to the internet is increasingly through smart devices.

Access to the internet, of course, means access to Google search, its email and other online spaces where it judiciously places its ads.

While it has long been a rule in print advertising that the price of ads is based on the physical space those ads take up and the potential audience. While there is a considerable difference between print and Google, in terms of ad pricing not a lot appears to have changed.

This is largely because many of those spending advertising dollars grew up on that print idiom and they don’t appear to be willing to pay as much for marketing on mobile devices as they would elsewhere.

The result is that the average price for ads that Google shows on its results pages has fallen again, for the fifth quarter in a row. In practical terms, this means that average ad prices fell by 6% for Google in this quarter — as opposed to 15% last quarter — the lowest decrease in the pricing downward spiral, suggesting that maybe it may bottom out soon.

And that appears to be what Larry Page is thinking, too. In a conference call following the earnings release he said he believed that prices will start to gradually rise as devices develop and new ways of reaching audiences present themselves.

But this time around there is little point in reading too much into the figures as there are a number of variables that have entered the equation, the implications of which will only become clear in the coming months.

Google, Motorola

The US$ 12.5 billion acquisition of Motorola only registered eight months ago and is still only starting to have and impact now as is its entry into devices through the Nexus range.

Speaking about the problems cause by smartphones, Page said that Google had work to do in managing supply better and creating a better customer experience, but that Motorola was well placed to help with this.

Google is also continuing to push through the sale of Motorola Home television set top box business to Arris for US$ 2.35 billion saying that with the stripped-down Motorola it will be focusing on a smaller line-up of products in the mobile phone business.

It has yet to fully exploit Motorola to the full, even if it brought in US$ 1.51 billion in revenues, with a time frame of 12 to 18 months anticipated to get through the existing product pipeline. Interesting quarter ahead.

 
 
 
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