Google Says Mobile Drove Q1 Earnings Growth

Iain Morris
News Analysis
Iain Morris, International Editor

Google has seen off the challenge posed by the strong dollar to report a healthy jump in sales and profits for the first three months of the year.

The web giant's share price rose 1.5% in after-hours trading after it flagged growth in the volume of advertising business and good progress in the mobile advertising arena.

First-quarter revenues were up 12%, to $17.26 billion, compared with the same period last year, while net income increased by 3.9%, to $3.59 billion.

The strong dollar represents a threat to Google (Nasdaq: GOOG) because about half of its business comes from markets outside the US.

During an earnings call with analysts, Patrick Pichette, Google's CFO, said that unfavorable exchange rates had wiped about $795 million off first-quarter revenues, meaning sales would otherwise have risen by about 17%.

Pichette warned investors that if currency trends persist they will continue to have an impact on financial results throughout 2015.

According to data published in Google's earnings statement, the number of aggregate paid clicks from which Google generates advertising revenues rose by 13% over the first three months of 2014, with the aggregate cost per click falling by 7% over the same period.

Google does not separate mobile advertising results from overall figures but Pichette described strength in mobile as the "key driver of growth" and was eager to scotch views that Google has struggled in this sector.

"Many commentators are incorrectly assuming that the growth trends in our sites, clicks and CPCs [cost per clicks] are primarily due to difficulties monetizing search on mobile, but that's in fact not the case," he said, according to a Seeking Alpha transcript of the earnings call.

For all the latest news from the wireless networking and services sector, check out our mobile content channel here on Light Reading.

Pichette noted that Google has "re-tooled" the search engine for mobile usage so that customers can obtain results through voice queries.

The search-engine behemoth has also this week made changes to its mobile search algorithm to prioritize "mobile-friendly pages" in search results.

Mobile is becoming increasingly important to Google as the default means of accessing the Internet for billions of people in emerging markets where smartphone adoption has recently boomed.

But the company is under pressure from other web players trying to corner this opportunity.

Social network Facebook , which is perhaps Google's main rival in the mobile advertising market, is trying to attract emerging-market customers by persuading telecom operators to offer some mobile data services free of charge through its initiative. (See Zuckerberg Defends Against Indian Critics.)

"We're also working to eliminate the barriers to access from connectivity issues," said Pichette, according to the Seeking Alpha transcript. "For instance, in countries like India, where a user might have a slow wireless connection, we can deliver a fast loading light version of search so they can get their answers quickly and pay less for data."

Earlier this week Google plunged into the mobile connectivity market with Project Fi, which will see it offer mobile services by renting capacity from mobile operators Sprint Corp. (NYSE: S) and T-Mobile US Inc. (See Google's WiFi-First Mobile Service 'Fi' Is Here.)

Having its own mobile service could help Google drive mobile Internet traffic towards its own sites and applications.

"We wanted to try this new vision of fast and easy wireless service, and then work with the ecosystem of our carriers," said Pichette in response to questions about the Project Fi strategy during the earnings call, according to Seeking Alpha. "This one is really about services and how we can use today's platforms to actually just drive for more innovation."

Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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