The Scariest Thing About Google’s Earnings (GOOG)

Source: http://www.businessinsider.com/chart-of-the-day-google-cost-per-click-change-2012-4

On Google’s earnings call yesterday, some analysts honed in on a particular trend: declining cost-per-click rates, or CPCs.

Google’s ad revenue is determined largely by two factors: the number of clicks on ads (“paid clicks”) and how much advertisers pay for each click (“CPC”). The first number has been rising fast — it was up 39% in Q1 of 2012, compared with the previous year.

But the second number has started to decline, and was down for the second consecutive quarter (as compared with a year ago).

Google said that the factors driving CPC are very complicated, and include foreign exchange rates, rising mobile usage of Google (where advertisers pay lower prices per click), faster growth in developing countries (where prices are lower), and changes in ad quality all have an effect.

Most analysts seem to agree that CPCs, taken in isolation, are not the best measure of Google’s business. But if you’re looking for a reason why the stock went down today, other than the new class of stock the company announced, this might be it.

chart of the day, google cost-per-click change, april 2012

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By: Dr. Augustine Fou Friday, April 13th, 2012 news

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Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.

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