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Google slump in ad rates deepens

Published 19/07/2013

Google had a seventh consecutive quarter of falling ad prices
Google had a seventh consecutive quarter of falling ad prices

Google's financial performance faltered in the second quarter as a downturn in the internet search leader's advertisement prices deepened.

The results show that Google is still having trouble navigating a technological transition driving more online activity on to smartphones and tablets. Those devices pose a challenge because their smaller screen sizes fetch lower ad rates than on personal computers.

Google's stock fell more than 5% in extended trading.

Google's average advert rate fell by 6% from the same time last year during the three months ending in June. It marks the seventh consecutive quarter that Google's average ad price, or cost per click, has fallen from the previous year.

The magnitude of the declines had eased in each of the previous three quarters, raising hopes that the worse was over. Instead, things deteriorated from the 4% decline in ad rates posted during the first three months of the year.

The erosion contributed to results that fell below analyst forecasts.

Google earned 3.2 billion US dollars (£2.1 billion), up 16% from 2.8 billion US dollars (£1.9 billion) a year earlier.

If not for the costs of employee stock compensation, Google said it would have earned 9.56 dollars per share. That missed the average target of 10.80 dollars per share among analysts surveyed by FactSet.

Revenue rose 19% to 14.1 billion US dollars (£9.3 billion).

After subtracting Google's ad commissions, revenue stood at 11.1 billion dollars (£7.29 billion) - about 275 million dollars (£180 million) below analyst projections.

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