Google profit rises, but results fall short : Report

SAN FRANCISCO (MarketWatch)
Google Inc. reported higher profit and sales, but the company’sas the tech giant’s results fell short of expectations
The company also announced a plan to “continue to make significant capital expenditures.”

The Mountain View, Calif. company reported a second-quarter profit of $9.71 billion, or $9.54 a share, compared with a profit of $8.54 billion, or $8.42 a share, for the year-earlier period

Revenue, minus traffic acquisition costs, rose to $11.1 billion from $9.61 billion in the same quarter the previous year. Adjusted profit was $9.56 a share
Analysts polled by FactSet on average expect the company to post a profit of $10.80 a share, on revenue of $11.37 billion
“There are plenty of things not to like in this report,” BGC Partners analyst Colin Gills told MarketWatch

One point he cited was cost-per-click, the prices paid for Google advertising. Google reported a 6% year-over-year drop in CPCs for the second quarter

In the previous quarter, that number fell by only 4%

“It’s going in the wrong direction,” Gillis said

“It didn’t get better. It got worse.”

That trend is striking given expectations that CPCs would improve as Google rolls out a new system of selling ads, called enhanced campaigns

That system would allow advertisers to launch campaigns for both desktop and mobile devices

Ad pricing tends to be lower in mobile, and analysts speculate that the new system could lead to improved overall pricing

On the earnings call, Chief Executive Larry Page defended the shift to enhanced campaigns, saying Google is in “early stages of a very, very major change
I think we’re very pleased with how it’s going.”
Gillis said the results shows Google is “a maturing company” with shrinking margins
But on the call, Chief Financial Officer Patrick Pichette said, “We care about revenue growth we care about profitability
We care about both and as I said before, we’re not in a business to lose money
Regarding margins, we really look at every incremental profit dollar that creates shareholder value.”