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Google shares rise after online ad sales drive revenue higher

Friday, April 24, 2015 - 07:53
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Google Inc reported higher quarterly revenue and profit as rising online ad volume offset a hit from the strong dollar, sending the Internet company's shares higher in after-hours trading.

[SAN FRANCISCO] Google Inc reported higher quarterly revenue and profit as rising online ad volume offset a hit from the strong dollar, sending the Internet company's shares higher in after-hours trading.

Shares of the world's No. 1 Internet search engine rose after the results were released, climbing 3.5 per cent on Thursday to US$577.

While revenue and profit missed the forecasts of Wall Street analysts, many investors had been bracing for a weaker report, said BGC Financial analyst Colin Gillis.

The company has faced challenges in mobile advertising and is running up more expenses as it invests in new businesses. "The concern was that the first quarter results could have been much worse," Mr Gillis said. "There's a certain degree of relief rally happening." Revenue for the quarter that ended in March rose 12 per cent to US$17.26 billion, from US$15.42 billion a year earlier. Analysts on average had expected revenue of US$17.5 billion, according to Thomson Reuters I/B/E/S.

The rising dollar took a toll on results at Google, which generates about half of its revenue overseas. "Excluding the net impact of foreign currency headwinds, revenue grew a healthy 17 per cent year on year," Google Chief Financial Officer Patrick Pichette said in a statement.

The number of ads, or paid clicks, rose 13 per cent, while the average price of online ads, or "cost per click," declined 7 per cent.

Google's ad revenue has been pressured as more consumers access its online services on mobiles devices such as smartphones and tablets, where ad rates are typically lower.

In a conference call, Mr Pichette highlighted mobile ads as a key source of revenue growth during the quarter. "We are experiencing real strength in mobile search," he said.

The contribution of ad revenue from video platform YouTube "continues to grow at a strong rate year-over year," he added. Brands are embracing YouTube's TrueView service, where advertisers pay only when users opt not to skip an ad, he said.

Google's advertising sales in the first quarter rose 11 per cent to US$15.51 billion. The company, under increasing competition for mobile ad dollars from rivals such as Facebook Inc, tweaked its algorithm for mobile searches on Tuesday to favour sites that look good on smartphone screens.

Earlier this month, the European Union accused Google of abusing its dominance of Internet searches to push its own products. Net income rose to US$3.59 billion, or US$5.20 per share, from US$3.45 billion, or US$5.04 per share.

Excluding items, the company earned US$6.57 per share, just missing analysts' forecast of $6.60.

REUTERS