Google continues to make more money from ads even though it makes less money per ad.
In the fourth quarter of 2014, Google's advertising revenue grew by 15% to hit $16.1 billion. That boosted the company's overall revenue, which reached $18.1 billion on 15% year-over-year growth. But the company missed analysts' estimates when subtracting the money Google spends to drive traffic to generate that revenue.
Googlemakes more and more money with each passing year. Still, it has struggled to shift that machine into a higher gear as more of its money comes from mobile where the average ad price is lower than what Google has fetched historically from desktop. That appears to have slowed Google's revenue growth, which has become dependent on people clicking on ads as opposed to advertisers paying more for those clicks.
In the fourth quarter, Google registered 14% more clicks on its ads than a year ago but, on average, made 3% less money for each of those clicks than a year ago.
Google has now gone 13 straight quarters without nabbing more money on average for each ad a person clicks compared to the prior year. And it has gone eight straight quarters without notching a quarter-over-quarter increase in the average cost-per-click.
However Google has finally stopped the bleeding in one way. In the fourth quarter the average cost-per-click for ads run on Google's network of third-party sites actually increased by 6% year-over-year. By comparison the average cost-per-click for ads run on Google's own sites like search and YouTube dropped by 8%.
That's not the only divide between Google's owned properties and its network of third-party sites. While Google's own sites notched 25% more clicks on ads than a year ago, Google's network sites nabbed 11% fewer clicks.
The money that Google makes from its own sites eclipses the money it makes from others' sites. And that owned-site revenue keeps growing a lot faster than network revenue, which flatlined in the third quarter of 2013 and has failed to exceed 10% year-over-year growth since then.
It's hard to say why Google's own sites are doing so much better revenue-wise than its network of third-party sites. The inclusion of YouTube -- namely its monthly audience of more than 1 billion people and its more lucrative ads -- might be the reason. The cash cow that is Google search could be another. Or maybe Google's just done a better job of adapting its properties for mobile than those third-party sites.
However, the network sites' price increase suggest that Google's efforts to stanch the bloodletting from audiences' mobile migration may be working. In the third quarter of 2013, Google transitioned advertisers to its Enhanced Campaigns program that prices mobile ads in relation to desktop rates in order to nudge advertisers to pay more for those smaller-screen slots.
Google's network revenue growth has been rebounding since bottoming out in the third quarter of 2013. That could coincide with Google's full roll-out of Enhanced Campaigns. However that might not explain why the growth has continued despite fluctuations in ad volume and pricing for those third-party sites.