Google posted disappointing figures for its final quarter of 2014 Thursday as the company continued to struggle with monetizing its mobile search advertising business and was impacted by fluctuations in foreign currencies.
Although Google was able to increase its net income by nearly 41 percent year-to-year to $4.76 billion, its earnings per share came in at $6.91 while revenue was $18.1 billion for the quarter ending in December, missing analysts' expectations of $7.11 a share and revenue of $18.46 billion.
More than 50 percent of Google's revenue comes from overseas, and with foreign currencies fluctuating in recent months as the power of the U.S. dollar grows, the Mountain View, California-based company's total sales were affected. Google said revenue would have been more than $600 million higher had exchange rates remained constant throughout 2014. Also hurting Google were its costs and expenses, which were up 22 percent to $13.8 billion for the quarter.
The company's biggest problem, though, appears to be the state of its advertising business. Cost-per-click, which is how Google is paid every time users click on an ad, was down 3 percent year-to-year. That appears to be the result of an increasing number of users making search queries on their mobile devices, where Google gets paid less per ad than it does on desktops and laptops.
While mobile ads are paying off in dividends for companies like Facebook, Google is struggling because it has less space to put ads on smartphone screens and users don't tend to linger on the search service.
"When you're searching, you have a specific goal in mind," said Cathy Boyle, senior mobile analyst for eMarketer. "You're in and out quickly. When you're on something like Facebook, you're consuming content and you're staying on there longer. Google is struggling with people spending time in apps."
To increase its mobile advertising sales, Google may want to improve how it targets mobile ads to users. Delivering relevant ads to users while they're on the go may prove an incentive to more advertisers to go to Google when they want to spend on mobile marketing, Boyle said.
During Google's earnings call, the company also was asked about competitor Yahoo's recent coup of gaining the default search engine spot on the Firefox Web browser and the rumblings that Apple may ditch Google as its search engine partner for Safari. Google did not address either partnership deal specifically, but said its only way to get users coming back is by continuing to innovate.
"If they love Google, they'll continue to find Google, whichever platform, whichever browser, and that's really what we're focused on doing," said Google Chief Financial Officer Patrick Pichette. "The way to win this in the long term is very simple: You just make wonderful products."