This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Google's Mobile Miracle

NEW YORK ( TheStreet) -- Google's (GOOG - Get Report) fourth-quarter earnings report showed that mobile worries may be a thing of the past, as a key metric for ads improved quarter over quarter. But Google, though, isn't out of the woods yet.

Cost-per-click (CPC), a key metric for ads, fell 6% year over year, but actually rose 2% sequentially, alleviating some of Wall Street's biggest concerns. The company doesn't break out mobile revenue from desktop revenue, but it's generally believed that mobile ads have been weighing on CPC results, driving down earnings. With CPCs rising sequentially, some believe that the "mobile miracle" is on its way to delivering mobile money for Google.

J.P. Morgan analyst Doug Anmuth said he feels better about the mobile transition going forward.

"As the business continues to shift toward mobile and advertisers think holistically about clicks rather than about which devices they're coming from, we think the Street will as well, and that bodes well for Google," Anmuth wrote in a research note.

For the fourth quarter, Google earned $10.65 a share on $11.3 billion in revenue during the quarter, excluding traffic acquisition costs (TAC). With TAC, Google generated $14.42 billion in sales, up 36% year on year, according to CEO Larry Page. Analysts polled by Thomson Reuters expected Google to earn $10.49 a share on $12.3 billion in revenue in the quarter.

There was still a blemish during the quarter that Wall Street is forgiving: slowing revenue growth. Deutsche Bank analyst Ross Sandler noted revenue growth slowed 1.3% to 20.3% year over year, but Wall Street is giving Google a pass as these are largely self-inflicted changes and not weakness in the company's overall business.

As more users search on phones and tablets, revenue may be at risk, with mobile monetizing worse than desktop, though it looks as if mobile ad rates may have bottomed out with CPCs rising 2% sequentially. The fear on Google is that it will look like Facebook (FB - Get Report) Sandler noted, but with the U.K. accelerating, which has similar penetration from mobile, this isn't the case.

"We think the U.S. deceleration is from the policy clean-up initiatives, not from desktop vs. mobile mix shift," Sandler said.

Aside from concerns on mobile ads, Google's mobile hardware business saw a sharp increase as sales of the Nexus devices continue to be robust. Other revenue, which includes Nexus hardware sales, were $829 million during the quarter, a year-over-year increase of 102%. The company admitted on the earnings call Tuesday that supply was constrained and though margins were higher than expected, sales were lower as well.

YouTube continues to be a star for Google, especially on mobile, where it recently released a new app for iOS, driving further views. On the earnings call, Google said viewers are watching 4 billion hours of videos a month, and that's translating to advertising revenue, with advertisers increasing their spend 50% from 2011 to 2012. The top 25 advertisers now spend over $150 million each per year on YouTube, helping Google's move to mobile.

One quarter does not a trend make, but it's clear that Google is starting to gain traction with mobile advertising. It may be a bumpy road ahead, but the trend is up, not down. That's got Google shareholders searching for higher share prices.

Interested in more on Google? See TheStreet Ratings' report card for this stock.

-- Written by Chris Ciaccia in New York

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FB $92.07 0.00%
GOOG $626.91 0.00%
AAPL $110.38 0.00%
TSLA $247.57 0.00%
YHOO $30.71 0.00%


Chart of I:DJI
DOW 16,472.37 +200.36 1.23%
S&P 500 1,951.36 +27.54 1.43%
NASDAQ 4,707.7750 +80.6910 1.74%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs