SAN FRANCISCO — Google’s third-quarter results might have proven that a deepening decline in the Internet search leader’s average ad prices matters less than how frequently people are clicking on the commercial pitches.
The numbers released Thursday impressed investors who had been fretting about a downturn in Google’s ad prices that began two years ago. Those concerns evaporated, at least temporarily, with a third-quarter performance that exceeded the analyst projections steering Wall Street.
Google’s ad prices are still sagging as marketers pay less for commercial pitches on mobile devices, but the number of revenue-generating clicks on those ads is rising at a much faster clip, resulting in a 36 percent increase in Google’s earnings for the three months ending in September.
Google’s stock surged 8 percent to $959 in extended trading after the report came out. That leaves it poised to reach an all-time high in today’s regular trading session.
The robust rally represents an abrupt about-face. As the overall stock market rose, Google’s shares had slipped slightly. The reason: Google’s previous quarterly report in mid-July revealed the deterioration in the company’s ad prices was getting worse.
Google’s average ad price has now declined from the prior year in each of the last eight quarters, primarily because advertisers aren’t paying as much for mobile ads because the screens on smartphones and tablet computers are smaller than laptop and desktop computers.
As more people rely on mobile devices to connect to Google’s search engine and other services, it’s driving down the company’s average ad price, or “cost per click.”
But the number of so-called “paid clicks” on Google’s ads helped offset the lower prices. The clicking volume increased 26 percent from last year, an indication that Google’s data analysis is doing a good job matching ads with the interests of its services’ users.
Revenue for the third quarter rose 12 percent from last year to $14.9 billion. After subtracting commissions, Google’s revenue was about $227 million above predictions.
Motorola Mobility, a mobile device maker that Google acquired for $12.4 billion last year, remains a financial drag. The division lost $248 million in the quarter, and still hasn’t made any money under Google’s ownership.
In a mild surprise, Google CEO Larry Page disclosed Thursday that he doesn’t plan to regularly participate in the company’s quarterly earnings calls with analysts in the future.
Page, 40, missed an earnings call last year because of an ailment on his vocal chords that made it difficult for him to talk. Although his voice remains raspy, Page didn’t mention that as a reason for skipping the calls. He said he wants to devote more time to running the company and helping Google’s engineers.
Google’s stock gained $70.21 to $959 in extended trading. The stock has never surpassed $928 in regular market trading since Google went public at $85 per share nine years ago.