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Google’s Revenue from Advertising Business Falls by 8 Percent

According to a recent report in the New York Times, Google’s sale of ads has fallen for the eighth quarter in a row. Google’s core revenue is from the price that advertisers pay each time someone clicks on an ad.
Google’s Revenue from Advertising Business Falls by 8 Percent
The report says that Google’s stock hit an all-time high in October 2013 and its third-quarter revenue is of $14.89 billion, 12 percent up from last year, but the revenue it makes from the ads fell by 8 percent from the same period a year ago. The main reason is that the people are spending more time on mobile devices and the search engine giant makes less money out of mobile advertising, one of the emerging viral marketing avenues that help businesses reach audiences on-the-go.

Jordan Rohan, an Internet analyst at Stifel Nicolaus said that as a financial services holding company, Google is doing well in emerging markets and in mobile technologies. If you look at Google’s revenue growth, you see it was largely driven by selling apps on Google Play, show that this opinion is well based.

The clicks on Google on tablets increased to 63 percent and have more doubled through phones as per the Search Agency, a digital marketing firm. People are obviously spending more time on mobile devices. Moreover, it is estimated that around 1.5 million Android devices are activated every day. But Google has failed to reap the potential in this market and as its desktop search and advertising businesses continue to develop, its growth is losing pace and the money earned from each ad sold is falling.

The transition to mobile advertising is unquestionably a revolutionary development in online advertising. Google has spearheaded a number of endeavors to encourage advertisers to utilize mobile devices:

  • Enhanced campaigns in its AdWords program which enabled advertisers to create a single campaign and target the campaign across various devices by giving directions to Google
  • Estimated Total Conversions to search ads on Google.com. This gives marketers a better understanding of how AdWords drives conversions for their business by showing both the conversions and also an estimate of conversions that take multiple devices to complete. The estimated cross-device conversions launched as a part of this tool can help the marketers find whether a consumer made a purchase through a computer after searching for that item on phone, which opens up new possibilities for mobile conversion optimization.

Google introduced other new endeavors for advertisers. It announced a change to show social networking activities (photos and comments) on ads across the web. Its new products, Chromecast (a device which can be used to watch Web videos on TVs) and Google Fiber (the ultra-high-speed Internet) target at capturing TV ad dollars. However, some innovations were criticized by privacy advocates (for instance, law suits relating to personalized ads in Gmail).

Even though mobile ads are cheaper than desktop ads, they lead to purchases only a quarter to a third of the frequency in which desktop ads do. There are three reasons for that – advertisers have not yet come up with an ideal format for mobile ads, it is more difficult to track the effectiveness of mobile ads, and consumers find it tedious to shop on small screens. Maybe that’s why, as market research company eMarketer points out, Google still leads in online advertising, with 41 percent of all digital ad revenue and 53 percent of mobile ad revenue.