If you’re looking for a deep dive into Google’s advertising business, you’re not getting it in an earnings call.
Google reported FY 2014 revenue of $66 billion, up 19% YoY. Its Q4 revenue was $18.1 billion, all inclusive of traffic acquisition costs (TAC), which were $3.6 billion in Q4 (22% of ad revenue). Read the press release.
Most of Google’s business comes from its sites ($12.4 billion or 69% of Q4 revenues) and its network ($3.72 billion or 20% of Q4 revenues).
Total paid clicks increased 14% YoY in Q4. This is a 25% YoY increase on sites and 11% YoY increase on network.
However, cost per click (CPC) in Q4 declined 3% in aggregate YoY. While CPC on Google’s network increased 6% YoY, CPC on Google sites declined 8%.
If you’re wondering why exactly paid clicks on Google sites increased 25% while CPC dropped 8%, you’re not alone. CFO Patrick Pichette pinned some of the blame on forex markets, but when analysts clamored for more detail, he was reluctant to step into the weeds.
“When people just focus on one [factor], we forget the big picture. It’s a mix of things that gives you that revenue,” he said citing geographies and device properties as other factors that could somehow influence the figures. “It would be misguided to pin it down to one trend.”
Pichette indicated that “the strength of mobile performance in our sites” as well as “impressive growth” in YouTube affected the disparity between CPC and click volumes.
Google’s CPC has often been hurt by expanding mobile traffic, since ad rates are cheaper on mobile than on desktop.
But what specifically is the rate difference between ads on mobile vs. desktop, and are they beginning to converge?
Pichette avoided the question. “We look at mobile as a behavior today,” he said. “We really think about the user and the context instead of a form factor or device. Similarly, in terms of the pricing model, we’re focused on building the ecosystem.”
Despite its claim around strong mobile performance, Google did not break out its mobile revenues, other than to proclaim it’s seeing “great momentum in mobile advertising” and that mobile revenues were up more than 100% YoY.
Much of the earnings call recapped various ad products Google rolled out in 2014, including local availability of product listing ads, app deep links in search results and improvements in Google’s measurement suite that shows how often a paid search ad click drove a store visit.
Google also highlighted its efforts around viewability and programmatic video programs like Partner Select, an exchange that has exclusive and premium inventory from more than 50 publisher partners like Hearst and the Food Network.
These happy distractions aside, the financial news is underwhelming, as analysts expected Q4 revenues of about $18.47 billion and earnings per share (EPS) at about $7.12. Google’s actual EPS is $6.91. Its stock was down roughly 3% in after-hours trading.