Lower rates for search ads on smartphones and tablets hurt revenue, not profit.
SAN FRANCISCO --Google shares are up nearly 4% in after-hours trading after the company reported fourth-quarter profit of $2.89 billion ($8.62 a share), exceeded the $2.71 billion ($8.22 a share) of a year ago.
On a non-GAAP basis, Google (GOOG) reported a profit of $10.65 a share, topping analysts' estimates.
Revenue for the search engine giant, excluding traffic acquisition costs, was $11.34 billion, up from $8.13 billion in the same period a year ago. Analysts polled by Thomson Reuters expected, on average, expected a profit of $10.47 a share, on revenue of $12.34 billion.
Results for the search behemoth, on the heels of a third quarter in which earnings tumbled, are giving investors a better sense on how the growing popularity of smartphones and tablet computers are affecting prices in the digital-advertising market.
The results offer a barometer of how advertising shifted online during the holiday-shopping season.
Like Facebook (FB), Zynga (ZNGA) and others, Google faces a vexing issue: as millions of people eschew conventional PCs for mobile devices, advertisers pay Google lower rates for search ads on smartphones and tablet computers than they do for ads found through searches on desktop PCs and laptops.
So far, advertisers haven't been willing to pay as much because of the disparity in screen sizes -- a major reason cited for Google's average ad prices declining four consecutive years.
Despite the downturn, Google's earnings have risen because the total number of clicks on the ads -- for which Google is often paid -- have steadily climbed.
Analysts are also closely scrutinizing its $12.4 billion acquisition of Motorola Mobility Holdings, which closed last year. Motorola has lost money, which will likely undercut Google's fourth-quarter earnings compared to 2011.
Source: http://www.theusalinks.com/2013/01/22/google-beats-profit-estimates-sales-fall-short/
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