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Online ad sales drive Google revenue

By Reuters
US, 24 Apr 2015

Google reported higher quarterly revenue and profit as rising online ad volumes offset a hit from the strong dollar, sending the Internet company's shares higher in after-hours trading.

Shares of the world's number one Internet search engine rose after the results were released, climbing 3.5% yesterday to $577.

While revenue and profit missed the forecasts of Wall Street analysts, many investors had been bracing for a weaker report, says BGC Financial analyst Colin Gillis.

The company has faced challenges in mobile advertising and is running up more expenses as it invests in new businesses.

"The concern was that the first quarter results could have been much worse," Gillis adds. "There's a certain degree of relief rally happening."

Revenue for the quarter that ended in March rose 12% to $17.26 billion, from $15.42 billion a year earlier. Analysts on average had expected revenue of $17.5 billion, according to Thomson Reuters.

The rising dollar took a toll on results at Google, which generates about half of its revenue overseas.

"Excluding the net impact of foreign currency headwinds, revenue grew a healthy 17% year-on-year," Google CFO Patrick Pichette said in a statement.

The number of ads, or paid clicks, rose 13%, while the average price of online ads, or "cost per click", declined 7%.

Google's ad revenue has been pressured as more consumers access its online services on mobile devices such as smartphones and tablets, where ad rates are typically lower.

During a conference call, Pichette highlighted mobile ads as a key source of revenue growth during the quarter. "We are experiencing real strength in mobile search," he said.

The contribution of ad revenue from video platform YouTube "continues to grow at a strong rate year-over-year," he added. Brands are embracing YouTube's TrueView service, where advertisers pay only when users opt not to skip an ad, he said.

Google's advertising sales in the first quarter rose 11% to $15.51 billion.

The company, under increasing competition for mobile ad dollars from rivals such as Facebook, tweaked its algorithm for mobile searches on Tuesday to favour sites that look good on smartphone screens.

Earlier this month, the European Union accused Google of abusing its dominance of Internet searches to push its own products.

Net income rose to $3.59 billion, or $5.20 per share, from $3.45 billion, or $5.04 per share.

Excluding items, the company earned $6.57 per share, just missing analysts' forecast of $6.60.

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