Longtime
Kordestani, most recently an adviser to CEO Larry Page, will essentially serve as Google's top ad salesman. He led Google’s sales teams starting back in 1999 when Google was tiny. He has been described by Google as “our business founder.” As Page said after his interim appointment:
When we hired Omid we had no business people so we had all the engineers interview him around a ping pong table. I think he survived because he is actually an engineer! Omid has always been one of my closest advisors, especially since I became CEO again in 2011. He personifies the entrepreneurial spirit that is so important to Google. There is nothing Omid doesn’t know about Google, our customers and partners, and I know that under his leadership the team will excel.
Arora had left after almost a decade at Google to join Japan’s SoftBank as CEO of its Internet and Media operation and vice chairman of the overall company.
Google needs someone to keep its momentum going, particularly to work on improving its mobile advertising. Lower prices in mobile advertising, as well as higher costs from building more data centers and new hiring, once again hit Google’s earnings in the third quarter, less than in previous quarters but enough to produce disappointing profits--and disappointed investors.
Google’s shares, which fell less than 1% on a flattish day for the overall market, were falling a little under 3% in extended trading after the market close and before the earnings call that began at 1:30 p.m. Pacific. The decline held steady during and after the call.
Earnings per share for the quarter ending Sept. 30 were $6.35 a share, up 13% from a year ago but below analysts’ average expectations of $6.54 a share. The company reported $13.17 billion in net revenues before $3.35 billion in payments to website partners for traffic, up 20%.
More specifically, investors are likely not bowled over by the few measures of its advertising business that Google reveals. Paid clicks rose 17%, but that was noticeably under Street estimates of 22%. Some of that lower growth may be Google's own doing, which is to say, not entirely a bad thing. Kordestani mentioned during the conference call that the company was reducing lower-quality clicks, apparently on ads run on other websites.
Meanwhile, ad prices, known as cost per click or CPC, fell 2%, about what was expected but well under the 6% decline in the second quarter. Also, the decline would have been only 1% if not for currency fluctuations. The improvement could relate to ditching those ineffective clicks. Still, a decline is a decline, not something investors want in a growth company like Google.
You can watch the earnings call on Google's YouTube investor relations channel below, and I've provided highlights below on the ad business in particular. More details are in Ellen Huet's earnings post.
* Paid-click deceleration: As he has in previous quarters, Chief Financial Officer Patrick Pichette said you can't look at cost per click alone but need to look at prices along with the number of paid clicks. "Google is still making good money there," he said, and is "happy with the trends."
* Mobile search: Pichette cited strength in mobile search, notwithstanding the apparently disappointing numbers. "We're very pleased with it," he said. "The CPCs and paid clicks can change from quarter to quarter." He cited Google's effort to cull out lower-quality clicks, which resulted in improved pricing. "On quarter-to-quarter movements, don't panic," he added.
Kordestani also said tools to better gauge the impact of ads on people across screens should help convince advertisers that spending on mobile whose impact has been tough to measure is worthwhile, though he said it's going to take awhile to get it right. By the way, it appears unlikely that advertisers are mostly replacing desktop ads with mobile ads. "Mobile searches are not cannibalizing desktop searches," says Matt Grebow, group director of paid search at The Search Agency.
* YouTube's appeal to TV advertisers: We've seen a real shift from agencies and brands reorienting investment to digital, Kordestani said. Nothing new on plans besides continuing to invest in new ad formats and in YouTube's homegrown stars. Kordestani also said Google continues to work with independent multi-channel networks, which have had a prickly relationship with Google thanks to the large cut of revenues it takes for running videos on the site.
* Mobile ads in apps: No specifics here, but Kordestani sounded a positive note on app developers getting good results from app install and app engagement ads through its AdMob mobile ad network that it acquired four years ago.
