In its third quarter Google (NASDAQ: GOOG) reported overall growth in its revenues, but analysts continue to fret over the world's slow transition from desktop computing to mobile computing and how Google's advertising business will be affected by that trend.
Google's revenues in the quarter clocked in at $16.52 billion, up 20 percent from the same period last year. Google's third quarter revenues were just slightly under financial analysts' expectations, according to the Wall Street Journal. And Google's net income clocked in at $2.81 billion, slightly below what the company reported in the year-ago quarter and just under what financial analysts had expected.
But one of the key metrics in Google's earnings report was the number of paid clicks on its ads--that figure rose 17 percent in the third quarter when compared with the same quarter a year ago, but that figure is down from the 25 percent year-over-year growth Google reported in the second quarter.
According to analysts, the figures could indicate an overall slowdown in Google's core advertising business--and the company's current inability to compensate for the decline with sales of ads into the mobile space.
Of course, it's not for lack of trying. Google is behind the world's most popular smartphone operating system--Android--as well as some of the world's most popular mobile apps like Gmail and YouTube. And Google continues to work to encourage more users to get online via mobile, particularly in emerging markets like India, Indonesia and the Philippines--indeed, those are all countries where Google is offering (India) or planning to launch (Indonesia and the Philippines) its new Android One initiative, which seeks to provide super-cheap Android smartphones to users who can't afford more expensive devices. But ad prices in emerging markets are lower than those in established markets.
"The problem is they get more traffic coming from Indonesia and Turkey and places where there's not as developed an ad market, so pricing is lower," Martin Pyykkonen, an analyst at Rosenblatt Securities, told Bloomberg. "Countries like that are mostly mobile traffic, so it just suppresses the number."
Indeed, Google executives have acknowledged that the mobile space continues to develop, and the company is still working to find the right approach to the space.
"It took many years, for example, for the desktop ecosystem to develop the right ad formats and really take advantage of the platform," Google's new Chief Business Officer Omid Kordestani said during the company's third quarter earnings conference call, according to a transcript of the event by Seeking Alpha. "So I think we just need to continue innovating here, experimenting here to get it right."
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