Costs of Google Inc. are rising as the search engine company is finding it harder to keep up with the broad shift that has occurred in advertising. Sales have fallen considerably short of the estimates as mobile phone advertising becomes a popular trend. Minus the sales that were passed onto the partners, the revenue in the first quarter was about $12.2 billion, which is short of the projection that was made by the analysts of $12.3 billion as per the data that was compiled by Bloomberg. The audience of the company is steadily shifting to smartphones rather than laptops and desktops and that’s where Google gets less money for marketing spots.
The dominance of Google in the online market is also being challenged by Facebook Inc. and other competitors. Even though, Larry Page, chief executive officer of the company is getting more advertisers to purchase promotions and giving total volume an increase of 26%, there is still a 9% decline in the average price of an advertisement. According to analysts, the single biggest risk for the company in the short run is mobile. Even though it seems to be helping as far as volume related metrics are concerned, it is having a negative impact on pricing.
During the first three months of 2014, the net income of the company was about $3.45 billion while it had been about $3.35 billion a year before, giving a share price of $5.04 and $4.97 respectively. However, for the first time after the company undertook a de-facto split of its stock earlier this month, the share price took a nosedive of about 6.2% and they had only advanced about 3.8% when the market had closed in New York. Apart from that, the company has also increased its spending for expanding its services as costs have risen quicker than sales.
In the latest quarter, revenue rose by 19%, but expenses saw a rise of about 23%. Prices of digital advertisements are being dragged down because of smartphones as smaller screens have limited the number of promotions and ads that can be displayed while marketers have become more particular in using these spots. In the first quarter, the cost of every click for search advertising on smartphone declined about 35%. Ad prices for tablets rose by 29% because they have larger screens and bear a similarity to traditional desktops. Analysts said that people want to see stability in prices and even though they are moving in the desired direction, they seem to be on a decline.
Nonetheless, the search engine giant has maintained optimism about its prospects. Chief business officer, Nikesh Arora said in the previous month that traditional businesses would eventually be outpaced by wireless gadgets. He said that in the future, mobile monetization would double as compared to desktop monetization. The other revenue of Google, which includes hardware like Chromecast and mobile Play Store saw an increase of 48% as compared to a year earlier and reached the figure of $1.55 billion. The company is making new investments for driving growth in the future.