Stampedes of mobile consumers are shaking up Google's online advertising moneymaker. People are doing more and more of their Web searches on smartphones and tablets, where advertisers pay Google lower rates for search ads than for ads found through searching on desktop and laptop computers.
That came to light in Google's earnings report Thursday. The cost-per-click rate advertisers pay Google for ads discovered through its search engine fell 15% from a year ago. That, along with losses from its recently acquired Motorola Mobility unit, weighed on Google's third-quarter financial results.
CEO Larry Page said on a conference call that Google is in the midst of a mobile boom. "All of this abundance causes disruption," he said in a hoarse voice. Page has been on a hiatus from speaking engagements because he lost his voice and was dealing with an undisclosed ailment.
Underscoring Google's mobile transition, the search giant reported third-quarter net income fell 20% from a year ago. The company missed both profit and sales projections.
Google's financial report came early in a release mishap from financial printer R.R. Donnelley that sent shares on a roller-coaster ride. Google stock ended the day down 8% at $695.
The search giant reported net income of $2.2 billion compared with $2.7 billion in the same period a year ago. Revenue, less traffic acquisition costs, came in at $11.3 billion, below the $11.9 billion expected by a survey of analysts by Thomson Reuters.
Excluding costs, the company's profit slid to $9.03 a share from $9.73 a share a year ago. Wall Street analysts were forecasting $10.65.
Google faces a similar problem to that of Facebook and Zynga. People are quickly moving to mobile platforms where the companies aren't positioned as well to make money as they are on the desktop.
"As they add more and more Android devices and that mobile monetization is lower than desktop monetization, you're going to see this trend," says HfS Research analyst Jonathan Yarmis.
A majority of the world's mobile devices run on Google's Android operating system.
Google dominates the mobile ad market in the U.S. The search company is forecast to snag 54.5% of the $2.6 billion market in 2012, according to researcher eMarketer.
Page says the company is well-positioned to capture the mobile migration of ad budgets. "Today there are over half a billion Android devices," he noted.
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