Google profit disappoints on slower ad growth and bigger expenditure

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Google profit disappoints on slower ad growth and bigger expenditure

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Google has disappointed Wall Street by revealing its latest quarterly revenue was short of expectations.

That was because growth in Internet advertising slowed in the most-recent quarter.

The total number of ads, or paid clicks, on Google expanded by 17 percent in the period from July to September.

But online advertising rates continued to fall.

They were down two percent year-on-year, though that was an improvement from the six percent decline in the second quarter.

The company also spent more during the quarter, increasing the number of employees by around 3,000 to boost research and development.

Google was able to announce a 50 percent increase in sales of digital music, software and mobile devices.

That segment, which analysts and investors say may become a bigger growth engine in the future, accounted for 11 percent of Google’s revenue in the third quarter.

The category also includes nascent hardware efforts such as the Chromecast TV dongle that lets users beam videos from PCs to TV screens.

Its hardware efforts likely carry much lower profit margins than the online ads that provide the bulk of its revenue. But sales of digital content could be very profitable.

While Google typically keeps roughly 30 percent of the revenue from sales of digital content on its online store, that revenue is much more profitable since Google has not incurred content creation costs, say analysts.

What’s more, those sales help Google’s overall business, including advertising. The more digital content that is available for mobile devices based on Google’s Android operating system, the more consumers will be attracted to those devices.

with Reuters