Google's Internet biz roars even as ad rates slide

Thu Jul 19, 2012 5:52pm EDT
 
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By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Google Inc's revenue increased 21 percent as strength in its Internet advertising business offset a persisting drop in ad rates, stirring hopes among investors the Web search leader is close to slowing that decline.

Shares of Google were up about 3 percent in after hours trade.

Advertising rates, or costs per click, have headed south as users gravitate to smartphones and tablets, where Google can generally charge less than on desktop computers.

Google said revenue for its existing Internet business totaled $10.96 billion in the quarter, up from $9 billion a year earlier. But the cost per click for online search ads continued to decline in the second quarter, falling 16 percent year-on-year.

The overall number of clicks on ads, however, increased a robust 42 percent. And some analysts highlighted a quarter-on-quarter 1 percent gain in the second quarter's CPCs.

"Search demand in the U.S. search was pretty solid, and despite economic challenges in Europe, I'm getting the sense that search demand was not too bad there," said Needham & Co analyst Kerry Rice.

Cost per click "was down more than I expected, but this could be a trough, since we did see a sequential uptick," Rice added. "We may have hit the bottom here."

Google, which recently acquired hardware maker Motorola Mobility, posted overall revenue of $12.2 billion for the quarter and net income of $2.79 billion, or $8.42 per share, on a consolidated basis.   Continued...

 
Google Inc's logo is seen at an office in Seoul in this May 3, 2011 file photograph. REUTERS/Truth Leem/Files