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Google Earnings
Jacques Brinon/AFP/Getty Images
A Google photo booth at the their French offices in Paris.
A Google photo booth at the their French offices in Paris. Photographer: Jacques Brinon/AFP/Getty Images
Google Inc. (GOOG), the world's largest Internet-search company, reported first-quarter profit that topped analysts' estimates after demand for its newer services helped fuel growth. It also introduced a new stock structure.
Profit before certain costs was $10.08 a share, the Mountain View, California-based company said on its website. Analysts had projected $9.64 on average, according to data compiled by Bloomberg. Excluding revenue passed on to partner sites, sales rose to $8.14 billion, matching estimates.
Chief Executive Officer Larry Page, who took charge a year ago, has pushed Google deeper into display advertising and mobile services. This year the company will account for 16.5 percent of the U.S. market for display ads, which include banners and videos, according to EMarketer Inc. By next year, Google is projected to grab almost 20 percent, unseating Facebook Inc. as the market leader.
"The viability of Google is still very, very strong," said Ron Josey, an analyst at ThinkEquity LLC in New York. He recommends buying the stock, which he doesn't own himself. "There's still a lot of room for growth across its multiple businesses."
Stock Split
The company announced plans for what it calls an effective stock split, introducing a new class of nonvoting capital stock. The shares will be distributed through a stock dividend to existing shareholders.
Google's shares were little changed in late trading after the announcement. They had risen 2.4 percent to $651.01 at the close in New York.
Google still gets most of its revenue from Internet search ads -- the text links that appear in query results. The average cost per click declined 12 percent in the first quarter after falling 8 percent in the fourth quarter. The number of paid clicks rose about 39 percent.
"The cost per click is worse than expected, but that looks like it was made up for by very strong paid click," said Clay Moran, an analyst at Benchmark Co. in Delray Beach, Florida. He has a hold rating on the stock, which he doesn't own. "There was good growth in revenue."
The company posted first-quarter net income of $2.89 billion, or $8.75 a share, compared with $1.8 billion, or $5.51 a share, a year earlier.
Move to Mobile
Mobile search ads have become a bigger piece of Google's business. Companies will probably commit 23 percent of their search-based ad spending to mobile devices by the end of this year, according to Marin Software, which helps manage about $3.5 billion annually in online ads. That's up from 8.7 percent at the end of last year.
Users are clicking on these ads more aggressively, Marin Software found. It expects mobile devices to account for 25 percent of all user clicks on search ads by the end of this year, up from 12.3 percent at the end of 2011.
Including both mobile and desktop-computer searches, Google had 76 percent of spending on query-based marketing in the first quarter, according to Covario Inc., an online advertising company. Microsoft Corp. (MSFT) and Yahoo! Inc. (YHOO), which are Internet- search partners, had 13 percent during the period.
Google is playing catch-up in the social-networking market, meanwhile, by promoting Google+. The service, introduced last year, is designed to let users easily share content by grouping acquaintances into "circles." Google+ now has more than 170 million users, the company said this week.
Still, Google has struggled to keep users engaged. In the U.S., Google+ visitors spent an average of 3.3 minutes on the site during January, compared with more than 7 hours for Facebook.
To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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