Google Inc. (GOOG:US), owner of the world’s most popular search engine, said second-quarter revenue surged 35 percent, helped by its acquisition of Motorola Mobility Holdings and as more users clicked on advertisements.
Including Motorola Mobility, sales were $12.2 billion, compared with $9.03 billion a year earlier, the Mountain View, California-based company said on its website yesterday. Profit before some costs was $10.12 a share. Google’s $12.5 billion acquisition of Motorola Mobility closed in May.
Google has been using ads on mobile devices and the YouTube video site to bolster revenue, and it continues to benefit from user queries on its home page. The company controls more than two-thirds of the U.S. search market, according to ComScore Inc., and its sales are tied to the number of times Web surfers click on ads that run on its pages and partner sites. The number of such clicks rose 42 percent last quarter.
“The fact that click volume was up 42 percent was quite impressive,” said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco. “That’s big growth, obviously influenced by mobile devices. Expectations were low.”
Excluding revenue passed on to partner sites and the impact of Motorola Mobility, second-quarter sales were $8.36 billion. On that basis, analysts were projecting sales of $8.39 billion, according to data compiled by Bloomberg.
Google shares (GOOG:US) rose 3 percent to $610.82 at the close in New York, paring the decline for this year to 5.4 percent.
The shares may have received a bit of a “relief rally” as Google delivered higher revenue than some of the more pessimistic estimates, said Clayton Moran, a Delray Beach, Florida-based analyst at Benchmark Co. Moran had estimated adjusted sales of $8.26 billion.
“The results were better than feared,” he said. “That’s the bottom line.”
Motorola Mobility contributed revenue of $1.25 billion for the period. Total net income rose to $2.79 billion, or $8.42 a share, from $2.51 billion, or $7.68 a share, a year earlier.
While total clicks on ads increased, the average cost per click in the second quarter declined 16 percent from a year earlier, and was up 1 percent from the prior period.
The average cost per click was dragged down by currency exchange rates, including the strengthening dollar against the euro, said Chief Financial Officer Patrick Pichette during a call with analysts. Had foreign exchange rates remained constant from a year earlier, Google’s revenue in the second quarter would have been $350 million higher.
The company saw relative strength in the U.S., Canada and Asia. Southern Europe, including Spain, was hampered by a weak economy, said Nikesh Arora, a Google senior vice president. Still, northern Europe performed better, with particular strength in the U.K., he said on the call.
“Our business had a very strong quarter,” he said.
As Google had expected, Chief Executive Officer Larry Page didn’t join yesterday’s call because he lost his voice. Arora said Page continues to run the company and is involved in strategic decisions.
Google’s purchase of Motorola Mobility shored up its patent portfolio to better combat legal challenges against its Android mobile software. Motorola Mobility, which has more than 17,000 patents, also helps Google enter the hardware market to compete more directly with Apple Inc. (AAPL:US) and others.
Android software, which Google offers at no cost to device makers, leads the smartphone market. Google-powered devices accounted for 56 percent of global sales in the first three months of the year, compared with 23 percent for Apple’s iPhone, according to Gartner Inc.
Google is using smartphones to help drive mobile advertising, a new area of growth. Users may see ads when they look at an application or query Google’s search engine. The company’s search service grabbed 67 percent of the U.S. market last month, more than twice the share held by Microsoft Corp. (MSFT:US) and Yahoo! Inc. (YHOO:US) combined, according to ComScore.
“Search is clearly still the engine of growth here,” said Kerry Rice, a San Francisco-based analyst at Needham & Co. “Search, in my mind, is the best return on your investment for Internet advertising that exists today.”
The company is also pushing into display advertising, which includes graphical banner ads, on desktops. Google is expected to grab 16.5 percent of the U.S. market this year, trailing No. 1 Facebook Inc. (FB:US), which should have 16.8 percent, according to EMarketer Inc. Google will assume the top spot next year with a 20 percent share, EMarketer projects.
To contact the reporter on this story: Brian Womack in San Francisco at email@example.com
To contact the editor responsible for this story: Tom Giles at firstname.lastname@example.org