Google’s Outsized Ad Growth Offsets Steep Price Decline

David Paul Morris/Bloomberg via Getty ImagesBy Alexei Oreskovic

SAN FRANCISCO – Google’s quarterly revenue beat Wall Street’s target despite an ongoing decline in prices for its online ads and deepening losses at Motorola, the handset-making division to be sold to China’s Lenovo.

Shares of Google (GOOG), which have risen more than 20 percent in the past three months, rose nearly 4 percent to $1,178 in after-hours trading Thursday.

Google executives said in a conference call Thursday that the company benefited from strong demand from brand marketers and retailers in the fourth quarter, as well as healthy demand for online ads in international markets.

“In the holiday season one thing has become very clear, the Web has truly become the new holiday store window,” Google Chief Business Officer Nikesh Arora said.

Paid clicks on Google’s online ads jumped 31 percent during the typically busy holiday quarter, but the average cost per click that marketers paid the company slid 11 percent.

Google’s advertising rates, like those of other Internet companies including Yahoo (YHOO), has been under pressure as more consumers access its online services on mobile devices such as smartphones and tablets, where advertising rates are lower than on PCs.

Motorola, which Google has agreed to sell to China’s top PC maker for $2.91 billion, saw operating losses of $384 million in the quarter, more than double the $152 million loss from a year earlier.

The Internet search giant has struggled to turn the unit around in the face of steep competition from Apple Inc, and the sale of the loss-making unit is considered a positive for Google.

Google’s consolidated revenue, which includes the money-losing Motorola smartphone business, rose to $16.86 billion from $14.42 billion in the fourth quarter of 2012. Analysts polled by Thomson Reuters I/B/E/S were looking for $16.75 billion.

Revenue in Google’s core Internet business totaled $15.7 billion in the last three months of the year, up 22 percent from the $12.91 billion in the year-ago period.

Google’s consolidated net income was $3.38 billion, or $9.90 a share, compared to $2.89 billion, or $8.62 a share, in the year-ago period. Excluding certain items, Google said it earned $12.01 a share, below analyst expectations for about $12.20.

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