The company’s annual run rate for mobile advertising has jumped from $2.5 billion to $8 billion.
Google Inc.’s third-quarter results demonstrated how the rapid growth of mobile devices has become both an opportunity and challenge for Internet companies — and may play into reports next week from rivals Facebook Inc. and Yahoo Inc.
Google’s mobile factor may affect rivals
Oct. 19, 2012, 4:29 p.m. EDT
Facebook, Yahoo under the gun to show growth in mobile ad sales
By Benjamin Pimentel, MarketWatch
SAN FRANCISCO (MarketWatch) — Google Inc.’s third-quarter results demonstrated how the rapid growth of mobile devices has become both an opportunity and challenge for Internet companies — and may play into reports next week from rivals Facebook Inc. and Yahoo Inc.
Reuters
Yahoo YHOO -1.00% reports its third-quarter results on Monday, while Facebook FB +0.13% reports on Tuesday. The reports come at a time when the mobile ad market is rapidly expanding, but has left the three Internet giants scrambling for the most effective way to get a bigger slice of that fast-growing pie.
Google GOOG -1.90% had some good news on the mobile front in its results posted on Thursday. The company already is getting a boost from the daily activation of 1.3 million smartphones using its Android operating system. On top of that, Chief Executive Larry Page announced that the company’s annual run rate for mobile advertising has jumped from $2.5 billion to $8 billion.
“That’s quite a business,” he told analysts. “Mobile search queries and mobile commerce are growing dramatically across the world.”
In fact, U.S. mobile advertising soared 127% to $1.1 billion in the second quarter, according to the most recent market data from IDC. But mobile growth has also been a headache for Google and its rivals. For one thing, the rapid shift to mobile has been a factor for slipping cost-per-click rates, or the prices paid for online ads.
BGC Partners analyst Colin Gillis said mobile device clicks convert into sales “less effectively” than traditional clicks on a desktop PC, and advertisers pay less for the mobile clicks.
“Before we jump up and down on that $8 billion number, I’ll point out that the clicks that are being created are lower-priced clicks, and there is a level of cannibalization going on,” he told MarketWatch.
In fact, Bank of America Merrill Lynch downgraded Google to neutral, arguing that “the mobile transition is accelerating, and more difficult quarters are likely in 2013.”
Yahoo and Facebook are facing even tougher challenges on the mobile front, as they gear up for their quarterly reports next week. Yahoo has very limited presence in the mobile ad market, said Gillis of BGC Partners adding, “They don’t they have very little mobile revenue to worry about.”
Analysts will likely focus on new CEO Marissa Mayer’s comments on the beleaguered Web portal’s direction. Wells Fargo analyst Peter Stabler wrote that “continued display advertising share losses will complicate turnaround efforts,” for the Web portal.
“We believe the challenge for Mayer is not to simply leap-frog competitors in the race to capitalize on mobile,” Stabler wrote. “Rather, we see an exercise in current product triage (e.g. continue to ramp video and other premium ad sales), as well as investing aggressively behind next generation consumer products.”
Meanwhile, Facebook’s struggle for a stronger position in mobile ads has been well known since its bumpy public trading debut in March. Wall Street cheered CEO Mark Zuckerberg’s September comments touting Facebook’s potential in the mobile space. But there are still doubts about its ability to monetize the rapid shift to mobile of its user base.
“The near-term outlook on Facebook remains somewhat cloudy due to the ongoing mobile transition,” Sterne Agee analyst Arvind Bhatia said in a note.
The company’s recently-launched Facebook Ad Exchange to help clients package and present ads more effectively has won upbeat reviews.
But in a note, Nomura analyst Brian Nowak said the system is not applicable to mobile. In fact, among the risk factors for Facebook he listed was the possibility that “mobile advertising monetization will take years to improve.”Read the article online here: Google’s mobile factor may affect rivals - MarketWatch
