For many years, Google Inc (NASDAQ:GOOG) has relied on online ad revenue to boost its bottom line. Despite the fact that the company is dabbling in many other areas, from mobile operating systems to wearable technology, this is its bread and butter (this could be interesting).
With all this in mind, the search engine giant seems to be running into some issues as far as its ad revenue is concerned. WRAL Tech Wire recently took a closer look at this, sharing details of the company’s second quarter downturn thanks to ad prices that nosedived.
Here is what you need to know:
“The results announced Thursday show Google is still having trouble navigating a technological transition driving more online activity on to smartphones and tablets. Those devices pose a financial challenge for Google because their smaller screen sizes fetch lower ad rates than the marketing pitches made on traditional desktop and laptop computers.”
In the past, this was not an issue Google Inc (NASDAQ:GOOG) had to deal with. Instead, the largest number of people were browsing the internet on a desktop or notebook. However, this trend is changing with a growing number of consumers turning to smartphones and tablets.
If Google is unable to find a way to keep up with this trend, it will be interesting to see what happens to its ad revenue in the years to come.
While you may not think this is a big deal, all you have to do is take a look at what happened to the company’s stock yesterday:
“Google’s stock shed $44.66, or nearly 5 percent, to $866.02 in extended trading after the results came out.”
For those who have not been keeping up, this is the seventh quarter in a row that Google Inc (NASDAQ:GOOG) average ad price has fallen from the prior year. In other words, this is not an isolated issue. It is one that the search engine giant has to pay close attention to.
Here is another piece from the article, showing the company’s financial performance:
“The erosion contributed to results that fell below analyst forecasts. Google Inc. earned $3.2 billion, or $9.54 per share, up 16 percent from $2.8 billion, or $8.42 per share, a year earlier.”
Things may not be looking up for Google Inc (NASDAQ:GOOG) in terms of its ad revenue, but this has not pulled the company down as a whole.