April 23, 2015 / 8:10 PM / in 2 years

Google shares rise after online ad sales drive revenue higher

A neon Google logo is seen as employees work at the new Google office in Toronto, in this file photo from November 13, 2012. REUTERS/Mark Blinch/Files

(Reuters) - Google Inc reported higher quarterly revenue and profit as rising online ad volume offset a hit from the strong dollar, sending the Internet company’s shares higher in after-hours trading.

Shares of the world’s No. 1 Internet search engine rose after the results were released, climbing 3.5 percent on Thursday to $577.

While revenue and profit missed the forecasts of Wall Street analysts, many investors had been bracing for a weaker report, said BGC Financial analyst Colin Gillis.

The company has faced challenges in mobile advertising and is running up more expenses as it invests in new businesses.

“The concern was that the first quarter results could have been much worse,” Gillis said. “There’s a certain degree of relief rally happening.”

Revenue for the quarter that ended in March rose 12 percent to $17.26 billion, from $15.42 billion a year earlier. Analysts on average had expected revenue of $17.5 billion, according to Thomson Reuters I/B/E/S.

The rising dollar took a toll on results at Google, which generates about half of its revenue overseas.

”Excluding the net impact of foreign currency headwinds, revenue grew a healthy 17 percent year on year,” Google Chief Financial Officer Patrick Pichette said in a statement.

The number of ads, or paid clicks, rose 13 percent, while the average price of online ads, or “cost per click,” declined 7 percent.

Google’s ad revenue has been pressured as more consumers access its online services on mobiles devices such as smartphones and tablets, where ad rates are typically lower.

In a conference call, Pichette highlighted mobile ads as a key source of revenue growth during the quarter. “We are experiencing real strength in mobile search,” he said.

The contribution of ad revenue from video platform YouTube “continues to grow at a strong rate year-over year,” he added. Brands are embracing YouTube’s TrueView service, where advertisers pay only when users opt not to skip an ad, he said.

Google's advertising sales in the first quarter rose 11 percent to $15.51 billion. (bit.ly/1OLAPb8)

The company, under increasing competition for mobile ad dollars from rivals such as Facebook Inc, tweaked its algorithm for mobile searches on Tuesday to favor sites that look good on smartphone screens. (bit.ly/1yMzbno)

Earlier this month, the European Union accused Google of abusing its dominance of Internet searches to push its own products. [ID: nL5N0XC2W0]

Net income rose to $3.59 billion, or $5.20 per share, from $3.45 billion, or $5.04 per share.

Excluding items, the company earned $6.57 per share, just missing analysts’ forecast of $6.60.

Reporting by Lisa Richwine, Devika Krishna Kumar and Yasmeen Abutaleb; Editing by Saumyadeb Chakrabarty, Bernard Orr

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