Editorial: $1,000 club

Oct 22 2013, 02:42 IST
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SummaryGoogle’s better-than-expected Q3 results sent its stock soaring. But there are reasons to be cautious

Google’s Q3 results last Friday managed to beat even the ridiculously high expectations of the Wall Street. Top line revenue was up 12%, and earnings 35%. The volume for clicks increased 25%. Google’s reward for performing so well came with its shares hitting all-time highs, including breaking the $1,000-a-share barrier.

Yet these quarterly results also contained notes for concern. Search remains the main conduit for Google’s core advertising business, and analysts have been brooding over and warning about the one-trick nature of Google’s business model for years—but with mobile internet gaining traction, the issue has acquired new significance for the company’s long-term prospects. Despite growth in the number of clicks, its average ad rate—how much it charges for each click on an ad—fell 8%, owing to lower mobile ad rates. Motorola is continuing to bleed money, and competition from Facebook and Twitter is only going to increase while the traditional market for text-based web ads is already saturated. It is not as though Google itself is unaware of these concerns, or is not taking steps to address them. Witness yesterday’s news that Google can now sell ad-space on Facebook. Even its so-called moon shots, like Google Glasses or driverless cars, appear to be geared towards finding new ways to advertise. Still, is the market exuberance around Google rational?

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