Google’s Profits Decline as It Spends Heavily in Q3

Google reported third-quarter profits of $2.8 billion (£1.7 billion) last week, down 5 percent from the same period a year earlier and falling short of analyst expectations.

While revenues increased by 20 percent year-on-year to $16.52 billion, Google’s profits took a battering, which has been credited to increased spending at the company.

The firm splashed out on almost 3,000 new employees, while Google’s real estate costs – covering its data centers and hardware inventory – increased by 37 percent year-on-year to $3.35 billion.

Google chief financial officer Patrick Pichette said, “Google had another strong performance this quarter, with revenue up 20 percent year-on-year. We continue to be excited about the growth in our advertising and emerging businesses.”

There was some good news hidden away in Google’s earnings report, however. The firm revealed that average ad prices, or “cost-per-click,” in the third quarter dipped by just 2 percent from last year, the smallest decrease the firm has reported in three years, and down from a 6 percent dive in Q2.

Google’s ad prices have been sinking owing to the growing popularity of smartphones over laptops and desktop PCs.

Marco Veremis, chief executive at Upstream said, “Google’s lackluster earnings in Q3 shows the struggle to bring increased mobile advertising revenue is going to go on a while longer.

“Its strategy in most markets of letting partner companies alter the Android OS has led to Google losing grip on that revenue stream.”

Google also announced that the total number of paid ads expanded by 17 percent in the third quarter, down from the 25 percent climb announced last quarter.

The company also revealed that it had appointed Omid Kordestani as its new chief business officer, replacing Nikesh Arora who had left to join Japan’s Softbank.

Google’s third-quarter earnings announcement comes just days after unveiling Android 5.0 Lollipop, the Nexus 9, and the Nexus 6 smartphone.

This article was originally published on the Inquirer.

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