The latest reports show 2012 Google sales up by 36%, while consolidated net revenue reached $11.34 billion. but the Internet giant struggled to capitalize on mobile growth.
The lack of mobile profit had little to do with Google’s overall success. Total revenues surpassed $50 billion for the first time in 2012, and most stats showed positive gains, including EPS. However, despite purchasing Motorola Mobile (and selling off some of its assets), the company remained weak on the mobile front, losing money on a cost-per-click basis.
Mobile activity was certainly not to blame, either. The number of paid clicks that actually brought in money for Google shot up by 24 percent, thanks in large part to more smartphone and tablet users, but cost-per-click numbers fell by 6% in 2012. Market share is also blameless, since Google controls an astonishing 93.3% of the U.S. mobile search market, thanks to its partnerships with Apple and its own Android work.
Mobile profit fell because of advertiser wariness. Emarketer reported in their analysis of Google’s growth that “shifting consumer behavior has dramatically increased the volume of mobile searches and paid clicks on mobile devices, but advertisers remain hesitant to pay rates per mobile click comparable to those on the desktop, as mobile searchers are still less likely to convert into purchasers than their desktop counterparts.”
In other words, companies don’t think that mobile advertising brings in as much business, so they refuse to pay as much for it. Considering the success of Facebook in capitalizing on its mobile display revenues – with the rise of the tablet, notably the iPad, in 2012 – and considering that the app market has never been stronger, this worry appears entirely unfounded. If anything, the loss of cost-per-click mobile profits says more about the hidebound fears of nondigital companies than Google sales.
Fortunately, signs show that change is on the horizon. Average cost-per-click revenue actually increased in the third quarter of 2012 before dropping again in the last quarter, showing some volatility that could indicate a readiness for change in the coming months. The massive spike in shopping through iPads and phones that Black Friday and the holiday season witnessed should also sway a few corporate minds.
In the meantime, analysts expect 2013 to be a major year for m-commerce of all kinds. Conversion rates are expected to steadily increase, and spending on mobile search ads is expected to grow by 55% before the year is out. Ad transition or integration between native and mobile devices will lead the way to an era where firms are not afraid to dive into the mobile pool. Google would be well advised to hold onto those mobile search assets for now.
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