Google hit by ad pricing and Motorola sales

Google’s stock fell about 1% at close and falling 5% in after-hours trading as it missed Wall Street forecasts for both revenues and earnings, as ad pricing came under renewed pressure from the shift to mobile and Motorola segment disappointed.

A substantial 6% drop in the price of each ad clicked, more than analysts had expected, came after Google introduced a new advertising system designed to help advertisers build more campaigns on mobile devices, where ad prices remain below desktop search ads. The price per click had fallen 4 per cent in the first quarter of the year.

“The shift from one screen to multiple screens and mobility creates tremendous opportunity for Google,” Larry Page, Google’s chief executive, said in a statement for Financial Times, putting a positive look on the price decline.

The companys Motorola smartphone division continues to lose money, as it is preparing the launch of a new flagship smartphone. The mobile phone maker posted a $342 million operating loss, widening from $199 million a year ago, as full-time employees halved during the quarter to 4,599 people.

During the past year, Google issued what its executives call “enhanced campaigns” which help marketers more easily run targeted ads on both the desktop and mobile platforms. Google CEO Larry Page explained that the company may not feel the impact of these campaigns for some time. Nikesh Arora, chief business officer, called the shift a “Herculean task”. He underlined also this is a requirement to pursue a strategy that allows advertisers to move across multiple screens. He said he expected advertisers’ return on investment to improve with the new system as Google developed better targeting capabilities.

Google rival Yahoo reported disappointing quarterly results on Tuesday. Yahoos sales retreated of both Wall Streets expectations. However, it recorded a 46% jump in quarterly profit when compared to the same period a year ago. Microsoft also reported weak quarterly earnings Thursday.