Google’s first-quarter results reflected how the trend for greater advertising on smartphones and tablets is less lucrative for the search giant.
Although Google’s revenue climbed 19 per cent to $15.42 billion compared to $12.95 billion in the same period last year, the performance was below analysts’ expectations.
Likewise, although total advertising volume rose 26 per cent, the average price of an advert fell by nine per cent, thanks to the migration to mobile devices which typically generates less revenue than online advertising.
However, Nikesh Arora (pictured), Google’s SVP and chief business officer, remained optimistic about the longer term prospects from the shift to mobile devices.
“I’ve had a firm belief and I continue to hold on to it that I believe in the medium to long term. Mobile pricing has to be better than desktop pricing.”
The reason is that mobile devices enable the search giant to hold a user’s location and their context which it lacks when they are on the desktop, he said.
Quarterly net income rose $3.45 billion, up from $3.35 billion a year earlier.
Net revenue, which excluded payments to Google’s partners, was $12.2 billion in the quarter, which was below analyst projections.
The company also blamed the $3.2 billion acquisition of smart device vendor Nest for impacting its first-quarter results. The acquisition affected all of the company’s operating lines, said Google CFO Patrick Pichette, but particulary R&D.
Google’s Q1 R&D costs of $2.1 billion were up more than $500 million from $1.6 billion a year ago.
A company spokesman explained to Re/code that the increased 2014 figure was largely due to a growth in payroll costs linked to Nest research employees.