Reality Check

Reality Check

January 22, 2013

Google Reports Great Earnings, Challenges Remain

By Robert Hashemian, Vice President of Web Development

Google (News - Alert) reported revenues and earnings above consensus estimates for its last quarter after the market close today. Revenues rose 39% to $11.3 billion and net income rose by 6.6% to $2.89 billion. Judging by the after-hours reaction, sending the shares up by some 5%, the street seems quite happy with the numbers.

The question now is whether this upward momentum will continue for the search behemoth. There exist two factors that may collar Google's growth to some degree. One is the search engine competition, specially from Bing, owned my Microsoft (News - Alert). Yes, Bing is still alive and doing relatively well and is showing some signs of success with the latest expanded integration of Facebook into its mix of search results. Of course Facebook (News - Alert) (and other social networks) are cutting into Google's dominant position as well.

The second factor is the ever increasing users' reliance on mobile platforms in favor of desktops. Desktops continue to show much better conversion rates  compared to mobile advertising. There are a number of reasons for that but one is that Web browsers are perhaps the most used applications on desktops, while people use a variety of apps on smartphones. Another reason would be the lack of sufficient real-estate on smartphone surfaces. Other reasons include unwitting user clicks on ads on smartphones and lack of user trust in ordering products or services from smartphone, both of which deter advertiser from establishing large presence on the mobile market.

For now however no one should count Google out. This is an innovative and competitive company capable of bold moves and quick executions. Chances are the parade of good earnings from Google will continue to roll well into the future.


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