Google results fall short as advertising rates drop

Google’s financial results fell short of Wall Street expectations in the fourth quarter as declining search advertising rates hit revenue growth.

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The search giant reported a 27% increase in revenue to $10.6bn (£6.8bn) in its final quarter, but the company’s earnings per share were $9.50 – short of the $10.49 analysts had predicted, causing its shares to tumble 10% in after hours trading.

The average price paid by marketers for cost-per-click (CPC) ads dropped 8% in the quarter, as users migrated from the desktop to mobile platforms, which are seen as less valuable by advertisers than larger screens.

Google says the decline in CPC rates was due to changes in its advertising formats, which has driven the sharp increase in the total number of clicks by users, which is up 34% year on year.

Larry Page, Google CEO, says he is “super excited” about the growth and increasing integration of its products, including Android, Gmail and Google+, which now has more than 90 million users. He claims that 60% of Google+ users engage with the social network daily.

“By building a meaningful relationship with our users through Google+ we will create amazing experiences across our services. I’m very excited about what we can do in 2012 – there are tremendous opportunities to help users and grow our business,” he adds.

Earlier this month, Google introduced “Search, Plus Your World”, which gives more dominance to content from users’ friends posted on Google+.

Revenue from the UK totalled $1.06bn in the period, representing 10% of total revenues in the fourth quarter. Global net profit rose 6.4% to $2.7bn.

Elsewhere in the technology sector, Microsoft posted a 5% year on year increase in revenues for the last three months of the year to $20.89bn, which also slightly missed analysts’ forcecasts.

Profits fell to $6.62bn, from $6.63bn in 2010.

While Microsoft saw strong demand for its business products and services, it suffered a 6% decline in revenue to $4.7bn in its Windows division as consumer trends for smartphones and tablets dented PC sales.

Microsoft CEO, Steve Ballmer, says: “We delivered solid financial results, even as we prepare for a launch year that will accelerate many of our key products and services.”

The company is set to roll out a new “Metro”-style design across its phones, PCs, tablets and TV services that it hopes will keep the brand relevant compared to its rivals.

Chipmaker Intel, which is pinning its future hopes on the new “Ultrabook” sub-category of computers it has created, posted better than expected revenues for the fourth quarter, given the disruptions from flooding in Thailand last year.

Revenues grew 21% to $3.5bn in the last three months of 2011 and net profit rose 6% to $3.4bn.

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