Before Google’s earnings announcement today, many investors and analysts were hoping for details on progress in building and monetizing the massive corporation’s mobile ad network.
It’s an area of Google’s business that continues to see a lack of sunlight, even though it may be the most promising sector that the company’s playing in today.
True to form, in its earnings announcement today, Google again reported mobile ad revenues in a bundle with other ad business lines. Paid clicks from ads served through Google’s AdSense for Search, AdSense for Content, and AdMob businesses (that’s the mobile part) increased approximately 9 percent over the second quarter of 2013 but decreased 5 percent over the first quarter of 2014.
But we really don’t know much about the volume, price, or profitably of Google’s mobile ad business.
“Google has tended to take a holistic approach to advertising,” IDC analyst Scott Strawn tells VentureBeat. They tend to talk about ad results in terms of many different devices, Strawn says, but he wishes the company would talk about mobile cost-per-click numbers specifically.
“They’ve been successful in search and display, but in fact, over time, monitization on mobile should be as good or better,” says IDC analyst Scott Strawn. “But we haven’t really seen more detail, and that’s what’s needed to give investors a greater level of comfort.”
And, of course, when a public company is vague on the results of a business line, the natural reaction is to wonder if it’s hiding an area of poor performance. That skepticism may be warranted. Strawn says he’s talked to Googlers who have said openly that Google was “caught off guard” by the rapid growth in demand for mobile ads.
And, Gartner analyst Andrew Frank says, the industry reasons to believe that Google is facing challenges in mobile.
“It’s an interesting place to watch, especially with the tradeoff about volumes going forward and pricing pressure on clicks, which have been fairly volatile,” Frank told VentureBeat.
Frank explains that the mobile ad market is ruled by a supply-and-demand dynamic: The number of mobile users is going up, but the amount of mobile ad inventory may be increasing even faster. When there’s more inventory than people to view or click, the price of the inventory goes down, and mobile ad profits decline.
Google CFO Pachette said during the earnings call that he “took issue” with a question from an analyst concerning specific results of the mobile ad business.
The research shows that consumers view content on multiple screens, Pachette said. “They might start something on a smartphone or tablet then watch the rest on a smart TV.”
“So it becomes a question of how much attribution to give to each of these elements in the chain of views moving toward a purchase,” Pachette said. “What really matters is that you have a footprint of all of these devices.”
Google doesn’t feel the strong sense of urgency that Facebook felt when it dove into the mobile ad business. Facebook has been successful in mobile ads, the numbers show. Two years ago, people were criticizing the social network for having “no mobile strategy.” Today, mobile ads contribute half of Facebook’s revenue.
Google, meanwhile, is taking its time in what it sees as a developing market. “There’s long runway going forward,” Pachette said today. “I don’t think we have to fear the saturation of smartphone penetration for a while.”
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