Google Posts Strong Holiday Quarter as Retailers Boost Spending

'Gangnam Style' Star Psy Earned $8 Million in Ad Revenue From YouTube

By Published on .

Google had a big fourth quarter as advertisers boosted spending and retailers added the search giant's shopping ads to their arsenal.

Revenue, including sales passed on to partner sites was $14.4 billion, a 36 % increase from the fourth quarter of 2011 and an 8% increase from the prior quarter. The company announced that annual revenue crossed $50 billion in 2012 for the first time.

As usual, Google executives on the call didn't break out the performance of categories such as display and mobile in any detail. However, Chief Business Officer Nikesh Arora did call attention to high-performing ad units like Google's new product listing ads, which are part of its new "pay-to-play" Google Shopping vertical.

While retailers griped about the change when Google rolled out last fall, it didn't stop them from buying into the new ads; Adobe recently reported that 10.7% of the paid-search spend in retail under its management last quarter came from Google Shopping. "It's a product we believe is in the interest of the end user," he said.

Mr. Arora also provided a tidbit on YouTube. Gangnam Style, the most-watched YouTube video ever, earned $8 million in ad revenue for K-pop star Psy.

Google appears to have reversed a worrying trend: declining cost-per-click as users shift to tablets and mobile devices. Advertisers have perceived clicks on mobile devices to be less valuable and thus have historically bid less on them, making mobile search less lucrative for Google. The company reported that the average cost-per-click last quarter decreased 6% over the previous year, though it increased 2% over the third quarter.

Nonetheless, there's some indication that the imbalance between desktop and mobile cost-per-click rates are stabilizing. The drop in average cost-per-click in the third quarter from the previous year was 15%, making this quarter's seem less precipitous. And Adobe, which managed $2 billion in search spend in 2012, actually observed a 7% increase last quarter among its clients.

Google's opportunity in mobile search is immense. Spending on mobile search ads in the U.S. is expected to climb 55% to $3.6 billion next year, according to eMarketer projections, and Google's cut is expected to be 92.4%.

Digital agency 360i Exec-VP Jared Belsky said that the lack of mobile landing pages and effective mobile tracking are still barriers to entry for many marketers considering upping their mobile search spend to mirror the proportion of searches being conducted on mobile devices, but he sees that changing.

"We're going to see acceleration in investment of the infrastructure which then the money will follow," he said.

CEO Larry Page focused his remarks on technology innovations and gave an early hat-tip to the new Google Maps for Apple's iOS, which had been eagerly awaited amid hand-wringing last fall about the inferiority of Apple Maps. It was downloaded more than 10 million times in the first 48 hours, he said.

He also pointed to new and better things to come from Motorola, acquired last year. "When you drop your phone, it shouldn't go splat," he said. "There's real potential to invent new and better experiences."

Most Popular
In this article: