The tech giant raked in $15.4 billion in revenue, a 19% jump from a year earlier, but missed analysts' revenue and profitability estimates because of declining cost-per-click rates for its search ads and increased costs to make sure it's used on multiple platforms
Google missed analyst expectations in its first quarterly earnings report of the year because of declining cost-per-click rates for its search ads and rising costs to ensure its search engine is used on various platforms. The tech giant brought in $15.4 billion in revenue, a 19% jump from a year earlier that still missed analyst expectations of $15.54 billion. Earnings per share were $6.27, off the mark from analyst expectations of $6.41 per share.
The cost-per-click rate that Google charges businesses to place ads in its search engine was down 9% year over year, though it was flat compared with the fourth quarter of 2013. The figure had been tumbling during 2013 as more users transition to mobile devices, where Google is not able to charge as much for its ads. The downward trend in cost-per-click rates has affected the search industry as a whole.
The company’s traffic-acquisition costs, the money it pays to ensure that its search engine is the default in places like Apple’s Safari browser, also increased significantly, from $2.96 billion in the first quarter of 2013 to $3.23 billion in the most recent quarter.
Google agreed to sell its unprofitable Motorola phone unit to Lenovo for $2.91 billion in January, which will ease overall losses for the company in the future. Google shares slumped more than 5% in after-hours trading on the disappointing earnings report. The company’s share price has fallen considerably in recent weeks as part of an overall decline in tech stocks.