Thursday 18 December 2014

More than $22bn wiped off value of Google stock over night

Katherine Rushton

Published 17/04/2014 | 09:17

Google is selling its Motorola Mobility smartphone business to ambitious Chinese group Lenovo
Google has also announced the sale of its Motorola Mobility smartphone business to ambitious Chinese group Lenovo this week
Google logo

MORE than $22bn was wiped off the value of Google last night, amid fears that it is struggling to make as much money from mobile users as those on traditional desktops.

The technology giant saw revenues climb by a fifth to $15.4bn in the first quarter, while profits edged up 3pc to $3.45bn, below analysts’ expectations.

However, investors were most rattled by a sharp fall in the amount of money Google makes every time a user clicks on one of its adverts.

The so-called “cost per click” fell 9pc, as more people used smartphones to access Google’s services. Advertisers typically pay less to target people browsing content on a small screen than those on a larger one, meaning that Google has to attract more users to make the same amount of money.

However, Google assured investors that it had made considerable headway in improving the quality of its mobile product, and that mobile adverts would eventually become more valuable than those on larger screens.

“In mobile, you have location and context about individuals that you don’t have on a desktop,” said Nikesh Arora, Google’s chief business officer. He added that advertisers currently view digital platforms as an add-on to mainstream television advertising campaigns, but said Google would work with advertising agencies to come up with creative ideas that will reverse that pecking order.

Larry Page, chief executive of the Californian business, added that Google had made “lots of product improvements” during the quarter, “especially on mobile.” They were not enough to allay investor fears, however.

Shares in Google dropped as much as 6pc in after-hours trading.

It has a market capitalisation of over $500m.

The results also revealed a slowdown in growth at Google’s UK business. Revenues rose just over 10pc to $1.5bn, compared with a 19pc increase the year before. The company said it had done particularly well in the first quarter of 2013 because of “revenue favourable” weather.

 

Telegraph.co.uk

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