The disappointment came with Thursday’s release of fourth-quarter earnings that showed the Internet search leader fetched less money per click on its ubiquitous online ads, Newser reports.
The results announced Thursday fell way below the lofty expectations of stock market analysts. That caused Google’s shares to plunge more than nine per cent after the numbers were released.
Google Inc. earned $2.7 billion US, or $8.22 per share, during the October-to-December period. That’s just a 6 per cent increase from $2.5 billion, or $7.81 per share, at the same time in 2010, according to CBS.
The disappointing results could undermine confidence in the leadership of co-founder Larry Page, who replaced Eric Schmidt as chief executive in April, analysts said.
Page, 38, has been placing his bets on long-term projects at the expense of short-term returns, ruffling the feathers of some investors. In the fourth quarter, Google’s operating expenses shot up 34% from a year earlier, surpassing the 25% increase in revenue.
Analysts question whether Google’s heavy investments in Android mobile software or the Chrome Web browser are coming at too high a price to the bottom line. But Page said he was pleased with the fourth-quarter results during a Thursday conference call with analysts.
“I am most excited by the fact that we significantly improved our velocity and execution,” he said, according to Los Angeles Times.
If not for certain items, Google says it would have earned $9.50 per share. Analysts surveyed by FactSet had expected $10.51 per share.
Revenue climbed 25 per cent from the previous year to nearly $10.6 billion.
After subtracting ad commissions, Google’s revenue totaled $8.1 billion. That was about $300 million below the average analyst forecast.
That came as an unsettling surprise because investors had assumed a surge in online holiday shopping during November and December would enable Google Inc. to charge more for its ads. Instead, the average price decreased by 8 percent from the same time in 2010.
Page also touted the gains Google has made with its Google+social network, a key initiative to counter the rising influence of Facebook Inc.
Launched seven months ago, Google+ now has more than 90 million users, more than double the 40 million users it had three months ago, he said. Facebook still retains a commanding lead, with more than 800 million users.
Google continues to work to improve the quality of its search results to maintain its lead overMicrosoft Corp.’s Bing. This month, Google rolled out Search, plus Your World to give users more personalized search results.
Page said more than 60% of Google+ users use the product each day and more than 80% each week. He said Google was using Google+ to build a relationship with users.
“Understanding who people are, what they care about and the other people that mattered to them is crucial if we are to give users what they need when they need it,” he said.
Google’s Gmail service now has 350 million accounts, and the company’s Android mobile software is now running on 250 million smartphones and other devices, Page said.