Google Inc. (GOOG): What You Need To Know About CPC Rates

Google Inc. (GOOG)Google Inc. (NASDAQ:GOOG) took it on the chin with the premature but very surprisingly disappointing quarterly earnings report Thursday, as the company missed on both the top line and bottom line by significant margins. The stock plummeted 9 percent in a matter of minutes Thursday afternoon, causing NASDAQ to halt trading for a time. Even after everyone has had chance to pick up the pieces from the crash, get the license plate number and assess damage, the stock was still heading down as the numbers continue to be digested.

However, there is certainly a very silver lining in this otherwise very dark cloud for Google Inc. (NASDAQ:GOOG). And this silver lining may be anything but shiny for any print-media competitors (minus Newsweek, may it rest in peace).

A couple very interesting points are sort of buried in the middle of the summary of the earnings report, and they have to do with the company’s advertising business, which is really the heart and soul of the company’s revenue and business model. First, there is the “paid clicks” category and the cost-per-click (CPC) for the ads featured on Google and partner Web sites.  In terms of paid clicks, which essentially is the depth and breadth of advertising, rose by 33 percent over the same quarter of 2011 and 6 percent over the second quarter of 2012. Under the cost-per-click, that category dropped by 15 percent over the prior year and 3 percent over the previous quarter of 2012.

What does this mean for Google Inc. (NASDAQ:GOOG0 and advertisers? It means that the advertising business is doing well – to see a significant growth in the number of paid clicks along with a decrease in the cost per click (which actually is more around 8 percent when currency fluctuations are figured into the equation), this tends to mean that Google Inc. (NASDAQ:GOOG) is finding more users are clicking on their ads and it is benefiting the return of investment for the advertisers. The more clicks an ad gets, the cheaper the ad is for every click-through it receives.

This could serve as a further demonstration of the overall activity of consumers online and away from print and other offline media. Google Inc. (NASDAQ:GOOG) was at the forefront of this evolution of consumer attitude and preference, and it has reaped the rewards – and continues to do so, bad earnings reports notwithstanding. These two figures – paid click and cost-per-click – should be the main numbers that investors in Google Inc. (NASDAQ:GOOG) stock – like billionaire fund manager Julian Robertson of Tiger Management – should continue to watch before they give in to the short-term panic.

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