Google's Page: Predict The Future By Making It

Google reported that Motorola Mobility generated $1.51 billion in gross revenue during the fourth quarter of 2012, excluding the home unit, and consolidated earnings rose 36% to $14.42 billion. Overall, the Mountain View, Calif. company topped $50 billion in revenue for 2012.

Consistent with GAAP reporting principles, total acquisition costs (TAC) came to $3.08 billion or 25% of advertising revenue in the fourth quarter of 2012.

During the earnings call, analysts looked for more information about the future of Google Fiber, YouTube, mobile services, and international markets. "The best way to predict the future is to make it," said Google co-founder Larry Page.

The future of optimizing mobile Web sites, however, could become more complicated than first believed. The number of companies with mobile landing pages and Web sites is not as high as Google would like, but efforts like GoMo continue to improve.

Page doesn't necessarily want companies to build ordinary "mobile sites" because some are too simple, which gets frustrating when using a Nexus 4 that can render a full site. "We need to improve these experiences, which will take time," he said. "We should be designing for mobile phones, state of the art and a little beyond, so the experience works on all devices."



Breaking down Q4 2012 results, Google's top advertisers now spend about $150 million annually, according to Nikesh Arora, senior VP and chief business officer at Google. He also said top global advertisers spent 50% more advertising on YouTube in 2012, compared with 2011.

iProspect U.S. President Brian Kaminski told MediaPost that clients flowed more dollars into YouTube during Q4 2012. "YouTube became a strong vehicle for driving connections, engagement with users, and consumption of content," he said. "We saw campaigns in conjunction with other channels, such as television. We saw some funding innovations like companies taking 5% to 10% of the television budget and moving it over."

Advertising generated $12.91 billion -- up 22% -- during the fourth quarter of 2012, compared with the prior year. Revenue from Google-owned sites rose 18% to $8.64 billion; and partner sites rose 19% to $3.44 billion. Other revenue from Google rose 102% to $829 million in the fourth quarter of 2012, compared with the year-ago quarter.

Revenue generated from outside of the United States rose 53% to $6.9 billion, representing 54% of total Google revenue in the fourth quarter of 2012, compared with the fourth quarter of 2011.

Search comprises the largest portion of digital advertising spending in the U.S., driven in part by direct response advertisers. U.S. search ad spending grew to $17.58 billion in 2012, up from $15.10 billion in 2011, according to eMarketer.

Google accounts for 74.5% of U.S. search ad revenue last year, which is even more than the 74% share the company took home in 2011, eMarketer estimates.

Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its network members, rose 24% compared with the fourth quarter of 2011, but the cost per click fell 6%, and TAC, the portion of revenues shared with Google's partners, rose to $3.08 billion in the fourth quarter of 2012, compared to $2.45 billion in the fourth quarter of 2011.

Kaminski points to click volume and cost per click (CPC) as the biggest driver of revenue. "I was not surprised to see a 24% increase in clicks but a decrease of only 6% in CPC was impressive," he said. "The increase in cheaper mobile clicks was offset by increases in CPCs caused by the Q4 retail competition."

It didn't hurt that search marketing agencies like Covario, Kenshoo, and The Search Agency suggested that brands raise paid search investments. Many did. Those that did during Q4 2012 prospered with better returns on investments.

Google's GAAP operating income contributed 24% to revenue, or $3.39 billion. This compares with GAAP operating income of $3.51 billion, or 33% of revenues, in the fourth quarter of 2011.


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