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Google Earnings Up Despite Motorola Burden

  |  January 23, 2013   |  Comments

Online search giant Google exceeded forecasters' expectations with reported revenues of $14.42 billion for the last quarter of 2012. This is an increase of 36 percent over the comparable quarter in 2011, and an 8 percent increase over the previous quarter.

Online search giant Google exceeded forecasters' expectations with reported revenues of $14.42 billion for the last quarter of 2012. This is an increase of 36 percent over the comparable quarter in 2011, and an 8 percent increase over the previous quarter.

The company also said it achieved record earnings in fiscal 2012 of $50 billion, which Google CEO Larry Page said at a news conference was "not a bad achievement in just a decade and a half."

Net income in the fourth quarter (using GAAP), which takes into account a net loss from discontinued operations, totaled $2.89 billion, compared to net income of $2.71 billion in the fourth quarter of 2011.

Google also said gross total consolidated revenues for the quarter would have been $15.24 billion, or a 44 percent increase year on year, had it included revenues from set top box division Motorola Home in its calculations.

In late December, Google announced that it would sell Motorola Home to Arris Group for $2.35 billion in cash and stock. Google already warned analysts earlier this week that, as U.S. law requires, it would break out financial results from Motorola Home as a separate line item in its 2012 consolidated statements, making its net income look smaller for the final quarter and the 2012 fiscal year.

Revenue from Google's core Internet business, totaled $12.91 billion, or 89 percent of consolidated revenues, in the fourth quarter of 2012, the company said, representing a 22 percent increase over fourth quarter 2011 revenues of $10.58 billion. Minus traffic acquisition costs, the business saw net revenues of $9.83 billion, up from $8.13 billion a year earlier, making it come in slightly higher than expected, according to analysts polled by Reuters.

Within that business, Google-owned sites generated revenues of $8.64 billion, or 67 percent of total Google revenues, in the fourth quarter of 2012, an 18 percent increase over fourth quarter 2011 Google sites revenues of $7.29 billion. Google partner sites generated revenues of $3.44 billion, or 27 percent of total Google revenues, a 19 percent increase from fourth quarter 2011 of $2.88 billion. Other revenues from Google Inc. were $829 million, or 6 percent of total Google revenues, in the fourth quarter of 2012. This represents a 102 percent increase over fourth quarter 2011 other revenues of $410 million.

Looking at the advertising business, the aggregate cost per click, which indicates the amount advertisers pay Google, was down 6 percent year on year and fell for the fifth consecutive quarter. But the decline was not as drastic as some analysts had expected. "We implemented policy changes this year that improved CPC growth but lowered network revenue," said Google senior VP and CFO Patrick Pichette during the online press conference. "We made changes based on what was good for users and advertisers."

Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its network members, increased approximately 24 percent over the fourth quarter of 2011 and 9 percent over the third quarter of 2012. Traffic acquisition costs, the portion of revenues shared with Google's partners, increased to $3.08 billion in the fourth quarter of 2012, compared to $2.45 billion in the fourth quarter of 2011.

Google also said that revenues from outside of the U.S. totaled $6.9 billion, representing 54 percent of total Google revenues in the fourth quarter of 2012, compared to 53 percent in the third quarter of 2012 and 53 percent in the fourth quarter of 2011.

Nikesh Arora, senior vice president and chief business officer, also spoke positively of the growth in revenue from Google subsidiary YouTube. He said viewers watched 4 billion hours of video and Google struck $8 million in advertising deals last year. Top advertisers also spent 50 percent more on YouTube advertising in 2012 than the previous year.

Google subsidiary Motorola Mobile contributed to 11 percent of consolidated revenues in the fourth quarter of 2012 with a total of $1.51 billion in revenues. Google acquired the maker of mainly Android devices last year for $12.5 billion. Pichette said the company was "pleased with the velocity of change" at its new subsidiary and that it was working with a product pipeline of 12 to 18 months.

At 4.7 billion, Pichette said that Google's operating cash flow was very strong and something the company was pleased with.

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ABOUT THE AUTHOR

Mary Lisbeth  D'Amico

Mary Lisbeth D'Amico is a freelance writer based in Jersey City who frequently covers digital marketing, social media, tech startups, and venture capital. She has contributed to a wide range of publications including The Wall Street Journal, Business Week, Red Herring, and Real Deals. Find her on Twitter at @mldamico.

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