Commentary

Prices On Paid-Search Ads Fall, But Google Still Profits

Pile of MoneyA decline in the aggregated cost per click for paid-search ads in Q3 2013, enticed marketers to purchase more ads from Google during the quarter, increasing the company's aggregate revenue. Investors bought in to the uptick, pushing the stock price per share to more than $1,000 by Friday morning after the company reported third-quarter results Thursday.

The click cost fell, but Google sold more paid-search ads, which compensated for the decline. In fact, the overall cost per click fell 8%, compared with the third quarter. Although this was beneficial for marketers, more people clicked on ads in aggregate, pushing up revenue from paid clicks. In fact, paid clicks rose 26% in Q3 2013, compared with the year-ago quarter and 8% sequentially. Marketers spent less on each consumer click in aggregate, but bought more paid-search ads during the quarter.

Even with declining ad prices, which is good for marketers, Google's revenue rose 12% to $14.89 billion, generating a profit of $10.74 per share. Analysts estimated earnings per share at $10.34 from $14.8 billion in revenue.

Aside from introducing new tools and search algorithms to refine a maturing business, mobile helped to reduce the cost for markers, but drive up revenue and profits for Google. During Q3, Google introduced its first Motorola phone, the Moto X. It helped to increase Android activation rates to 1.5 million devices daily. Since launching the operating system, more than 1 billion devices have been activated that run Android, Google CEO Larry Page said during the earnings call Thursday.

“Google is a revenue freight-train, which I pointed out in a blog predicting this could easily happen back in July," said Covario Founder Russ Mann. "For all the questions about Enhanced Campaigns, PLAs, Mobile CPCs, Motorola Mobility, diversification into display, video, self-driving cars and solar planes, etc., Google continues to grow up and to the right, and the share price can’t help but follow."

Mann points out that search no longer remains just about text search on a PC. People now search on LinkedIn and Facebook.  There’s location search available on any and all GPS-enabled devices, video search not just on YouTube and Hulu, but on any DVR, TiVo, TV Guide, vocal search, gamification of search, and eye tracking and responsive search.  These are all areas that marketers will develop and monetize, he said. "You could say we are still only in the fourth or fifth inning of search," he said. Obviously a baseball fan. 

Pile of money photo from Shutterstock

1 comment about "Prices On Paid-Search Ads Fall, But Google Still Profits".
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  1. Mike Einstein from the Brothers Einstein, October 18, 2013 at 5:22 p.m.

    Laurie, you give us everything but the actual cost. What gives?

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About the Author

Laurie Sullivan is a writer and editor for MediaPost. You can reach Laurie at lauriesullivan@gmail.com.