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Google Earnings: Lower Cost-Per-Click Does Not Reflect Health of Our Business

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Google chief executive Larry PageGoogle CEO Larry Page on Thursday appeared to address industry speculation about whether his company would buy Pinterest or another lucrative tech property in wake of Facebook purchasing Instagram.

"We don't have a big acquisition plan, in case you are wondering," said Page, during the firm's Q1 earnings call. The comment followed statements about how his company is committed to developing products in-house.

Amid an otherwise strong earnings report, Google for the second consecutive quarter announced CPC prices were down, by 12 percent year over year for the quarter.

Execs for the technology giant assigned multiple reasons for the price decline, namely a shift towards mobile usage, increased targeting capabilities, and higher click volume. Aggregate paid clicks rose 39 percent over Q1 of last year.

"By adding [line items] that are more targeted," explained Nikesh Arora, Google senior VP and chief business officer, "you have less CPC for site links. But if it's a better ad, people click [a lot] more on them."

Google CFO Patrick Pichette said the CPC price drop does not "reflect the fundamental health of our business. In fact, our advertisers' bids continue to be strong and growing."

There was plenty of good news on the advertising front, though. Ad revenues on Google-owned sites in Q1 2012 totaled $7.3 billion, and $2.9 billion on network sites. Total ad revenues grew from $8.3 billion in Q1 2011 to $10.2 billion this year.

Brands across niches, Arora said, "are finally looking to digital media as an integral part of their marketing plans." For the ad industry's change in attitude, he credited increased brand confidence in how digital affects offline sales.

Arora said a recent global campaign by Reebok - which ran across Google.com, YouTube, Gmail, etc. – as well as Unilever's efforts in Brazil, are examples of the company enabling multinational ad initiatives. And the firm's focus on mobile advertising is intensifying, he suggested.

"Mobile is quickly becoming the backbone to advertisers' strategies," Arora said. "We keep working to help the mobile ecosystem."

Overall, Google reported Q1 2012 revenue at $10.65 billion, a 24 percent growth compared to the same period last year. Traffic acquisition costs also rose over Q1 2011, from $2.04 billion to $2.51 billion.

More than half - 54 percent - of Google's revenues came from overseas. The company reported $1.15 billion or 11 percent of revenues came from the U.K.

This article was originally published on ClickZ.


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