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Despite Strong Earnings, Google Is Still Stymied by Mobile

January 23, 2013 by Leave a Comment

Investors were comforted on Tuesday when Google announced strong fourth-quarter earnings, and the stock rebounded from a dip over the last week, climbing 5 percent in after-hours trading.

But a closer look at the results shows that while Google continues to be a moneymaking machine, its most lucrative business, search on desktop computers, is slowing, while Google has not yet figured out how to make equivalent profits on mobile devices.

“You would expect Google to be a key player benefiting from mobile, but that hasn’t played out in the last year,” said Jordan Rohan, a Stifel Nicolaus analyst.

The price advertisers pay Google each time someone clicks on an ad, known as cost per click or C.P.C., decreased 6 percent from the fourth quarter a year ago, falling for the fifth consecutive quarter on a yearly basis, though not as much as some analysts had feared.

The cost per click has been declining largely because advertisers pay less for mobile ads, and more people are using Google on their mobile devices and fewer on their desktop computers.

Still, Google has been trying to improve its mobile products — from developing new kinds of mobile ad campaigns to building devices like the Nexus 4 smartphone — and its executives say it is a matter of time before the numbers improve. Already, in the fourth quarter, the cost per click rose 2 percent from the previous quarter.

“We’re in some uncharted territory because of the rapid rate of change in these things, but I’m very optimistic about it,” said Larry Page, Google’s chief executive, on a conference call with analysts after the earnings were announced. “I think the C.P.C.’s will improve as the devices improve, as well.”

Mr. Page, who has had health problems related to his voice, sounded unusually weak and breathy.

Google reported revenue that was lower than analysts had expected. Google warned last week that analysts’ expectations were off target because Google sold Motorola’s set-top box division during the quarter and so did not include it in the quarterly results. Still, even including that division of Motorola, Google’s revenue would have missed expectations.

The company reported fourth-quarter revenue of $14.42 billion, an increase of 36 percent over the year-ago quarter. Net revenue, which excludes payments to the company’s advertising partners, was $11.34 billion, up from $8.13 billion. Net income rose 7 percent to $2.89 billion, or $8.62 a share.

The fourth quarter is generally Google’s brightest because it makes much of its money on retail ads that run during the holiday shopping season. This holiday season was the first that Google charged e-commerce companies to be included in its comparison shopping engine, and these so-called product listing ads contributed to its bottom line.

“Despite talk about retail having a weak season, Google’s product listing ad program has taken off quite successfully,” said Sid Shah, director of business analytics at Adobe, which handles $2 billion in annual advertising spending.

Home Depot increased mobile commerce sales by four times after using Google mobile ads, said Patrick Pichette, Google’s chief financial officer. He also cited YouTube ad revenue, saying the “Gangnam Style” video, the most-watched on record, has earned $8 million in online advertising deals. Election ad spending on Google increased five times over the 2008 election, he said.

Nonetheless, Google’s mobile challenge overhung even its usual holiday shopping sparkle. Consumers are increasingly shopping on phones and tablets, yet Google and other companies have not yet figured out how best to profit from mobile users.

One problem is that advertisers pay about half as much for an ad on a mobile device, in part because they are not yet sure how effective mobile ads can be. Another challenge is that consumers increasingly use apps, like Yelp or Kayak, to search on mobile devices instead of using Google.

And even when consumers use Google for mobile searches, they are often doing so on Apple devices like iPhones, for which Google has to pay Apple a fee. Those types of fees are large — equivalent to 25 percent of Google’s revenue in the quarter.

The shift to mobile is happening as Google’s biggest, most lucrative business — desktop search — is slowing. The share of clicks on Google results that happen on desktop computers has fallen to 73 percent from 77 percent in the last six months, while the share of clicks on tablets and smartphones has increased to 27 percent from 23 percent, according to data from Adobe.

The problem is that clicks on retail ads on tablets, for instance, cost about 16 percent less than they do on the desktop, according to Adobe. The price of clicks on retail ads on tablets rose 16 percent over the last year, but on smartphones they fell 11 percent.

As the desktop search sector slows, Google has a new search competitor to contend with: Facebook, which last week introduced a new form of personalized social search on the site.

Google has also recently become a maker of mobile devices, both by acquiring money-losing Motorola and by producing the line of Nexus devices with manufacturer partners.

In the fourth quarter, Google sold about 1.5 million Nexus phones and tablets, not including those sold by other retailers, according to estimates from JPMorgan, and has had trouble keeping supply up with demand.

Eventually, Google hopes, these various businesses will help it solve the mobile revenue riddle, but analysts say they do not expect it to happen in the near term. “You have your Motorola Android phone, get offered a local deal, go into the merchant, use Google Checkout to pay and get rewards,” said Colin Gillis, an analyst at BGC Partners. “That’s the grand vision and it’s a nice vision, but it’s not happening in March.”

Article source: http://www.nytimes.com/2013/01/23/technology/google-profit-exceeds-expectations.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Seeking Revenue, Greece Approves New Mines, But Environmentalists Balk

January 13, 2013 by Leave a Comment

For some residents, all this activity, which promises perhaps 1,500 jobs by 2015, is a blessing that could pump some life into the dismal economy of the surrounding villages in this rural northeast region of Greece.

But for hundreds of others, who have mounted repeated protests, the new mining operation is nothing more than a symbol of Greece’s willingness these days to accept any development, no matter the environmental cost. Only 10 years ago, they like to point out, Greece’s highest court ruled that the amount of environmental damage that mining would do here was not worth the economic gain.

“This will be a business for 10, maybe 15 years, and then this company will just disappear, leaving all the pollution behind like all the others did,” said Christos Adamidis, a hotel owner here who fears that the new mining operations will end up destroying other local businesses, including tourism. “If the price of gold drops, it might not even last that long. And in the meantime, the dust this will create will be killing off the leaves. There will be no goats or olives or bees here.”

Tensions over new development schemes are being felt elsewhere in Greece, too, as the country stumbles into its sixth year of recession, eager to bring in moneymaking operations and forced by its creditors to streamline approval processes. Environmentalists are objecting to plans that would sell off thousands of acres for solar fields and allow oil exploration near delicate ecosystems.

“We see laws changing, policies changing,” said Theodota Nantsou, the policy coordinator in Athens for the World Wide Fund for Nature. “We see things getting rolled back under the guise of eliminating impediments to investment. But over the long run, all these things will have a heavy cost.”

The fund says standards are widely being ignored or lowered, affecting air, water and land use, from the reduction of mandatory environmental impact reviews to plans for increasing coal use and the likelihood that 95 percent of Greece’s environmental fund — more than $1 billion collected for projects like improving energy efficiency and sustaining nature conservancies — will be absorbed into the general government budget.

In June, the fund issued a report saying it was witnessing an “avalanche of serious environmental losses.” It said some rollbacks were an attempt to fulfill the demands of the trio of creditors, the International Monetary Fund, the European Central Bank and the European Commission, that have been sustaining Greece in recent years. But it said that, to an equal extent, the losses were because of initiatives put forward by various ministries.

No project, however, appears to have elicited more of a public outcry than the resumption of mining operations in the mineral-rich hills here, where legend has it that Alexander the Great also mined for gold. Past mining operations here have been boom-and-bust enterprises, their fortunes swinging with the price of metals, leaving behind ugly piles of sandy gray tailings. Virtually everybody in the area has stories about the runoff from old mining operations, which turned the sea yellow at times.

But perhaps as much as anything, the anger over the mines is a reflection of the fundamental distrust many Greeks feel toward their government: a firm belief that most officials are busy enriching themselves, their friends and their families at the country’s expense. Nick Malkoutzis, a columnist for the conservative daily newspaper Kathimerini, wrote that it was hard to blame villagers for their distrust, when so often companies had been allowed to ignore regulations. “Perhaps in another country, locals would feel more comfortable with the project because the process for awarding public contracts or environmental certificates is transparent and trustworthy,” he wrote, adding that in Greece, that was not the case.

Dimitris Bounias contributed reporting.

Article source: http://www.nytimes.com/2013/01/14/world/europe/seeking-revenue-greece-approves-new-mines-but-environmentalists-balk.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Facebook Gift Store Urges Users to Shop While They Share

November 28, 2012 by Leave a Comment

The nudge comes from a new Facebook service called Gifts. It allows Facebook users — only in the United States for now — to buy presents for their friends on the social network. On offer are items as varied as spices from Dean DeLuca, pajamas from BabyGap and subscriptions to Hulu Plus, the video service. This week Facebook added iTunes gift cards.

The gift service is part of an aggressive moneymaking push aimed at pleasing Facebook’s investors after the company’s dismal stock market debut. Facebook has stepped up mobile advertising and is starting to customize the marketing messages it shows to users based on their Web browsing outside Facebook.

Those efforts seem to have brought some relief to Wall Street. Analysts issued more bullish projections for the company in recent days, and the stock was up 49 percent from its lowest point, closing Tuesday at $26.15, although that is still well below the initial offering price of $38. The share price has been buoyed in part by the fact that a wave of insider lockup periods expired without a flood of shares hitting the market.

To power the Gifts service, Facebook rented a warehouse in South Dakota and created its own software to track inventory and shipping. It will not say how much it earns from each purchase made through Gifts, though merchants that have a similar arrangement with Amazon.com give it a roughly 15 percent cut of sales.

If it catches on, the service would give Facebook a toehold in the more than $200 billion e-commerce market. Much more important, it would let the company accumulate a new stream of valuable personal data and use it to refine targeted advertisements, its bread and butter. The company said it did not now use data collected through Gifts for advertising purposes, but could not rule it out in the future.

“The hard part for Facebook was aggregating a billion users. Now it’s more about how to monetize those users without scaring them away,” said Colin Sebastian, an analyst with Robert W. Baird.

He added: “Gifts should also contribute more to Facebook’s treasure trove of user data, which has the benefit of a virtuous cycle, driving more personalization of the site, leading to better and more targeted ads, which improves overall monetization.”

Facebook already collects credit card information from users who play social games on its site. But they are a limited constituency, and a wider audience may be persuaded to buy a gift when Facebook reminds them that a friend is expecting a baby or a cousin is approaching her 40th birthday.

The Gifts service, which grew out of Facebook’s acquisition of a mobile application called Karma, was introduced in September and expanded earlier this month on the eve of the holiday shopping season.

Magnolia Bakery, based in New York, was among Facebook’s early partners for Gifts. Its vice president for public relations, Sara Gramling, said the company had sold roughly 200 packages of treats since then. She counted it as a marketing success. The bakery, which gained fame thanks to “Sex and the City,” had only recently begun shipping its goods. “It was a great opportunity to expand our network,” she said.

Magnolia Bakery isn’t exactly catering to the masses. A half-dozen cupcakes cost $35, plus about $12 for shipping. Facebook, Ms. Gramling said, takes care of the billing. The bakery is eyeing Facebook’s global reach, too, as it opens outlets internationally, especially in the Middle East.

One of the appeals of Facebook Gifts is the ease of making a purchase. Facebook users are nudged to buy a gift (a gift-box icon pops up) for Facebook friends on their birthdays. They are offered a vast menu to choose from: beer glasses, cake pops, quilts, marshmallows, magazine subscriptions and donations to charity. They are asked to choose a greeting card. Then they are asked for credit card details. Facebook says it stores that credit card information, unless users remove it after making a purchase.

Facebook has declined to say how many users have bought gifts, only that among those who have, the average purchase is $25.

David Streitfeld contributed reporting.

Article source: http://www.nytimes.com/2012/11/28/technology/facebook-gifts-urges-users-to-shop-while-they-share.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,