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Revenue from Google Inc's core internet business outpaced many analysts' expectations during the crucial holiday quarter and advertising rates fell less than in previous periods, pushing its shares up roughly five per cent.
The world's largest internet search company introduced new product listings during the fourth quarter — typically its strongest —and also benefited from business growth in international markets, analysts said.
Excluding traffic-acquisition costs, the business generated net revenue of $9.83 billion, up from $8.13 billion a year earlier, Google reported on Tuesday. That surpassed a $9.6 billion average forecast from six analysts polled by Reuters.
"Business looked really strong, especially from a profitability perspective. They really grew their margins in the core business," said Sameet Sinha, an analyst with B Riley Caris. "Most of that strength seems to be coming from international markets which grew revenues quite substantially: up 23 per cent year over year, versus the 15 per cent growth in the third quarter."
Average cost-per-click, a critical metric that denotes the price advertisers pay Google, declined 6 per cent from a year ago, the fifth consecutive quarter of decline but an improvement over the third quarter's 15 per cent slide.
Google executives told analysts on a conference call that policy changes related to the quality and quantity of ads appearing on certain of its Web properties had helped shore-up click prices while lowering the overall growth rate of paid clicks in the holiday quarter.
"Click prices are still declining, but it's better than expected," said BGC Partners analyst Colin Gillis.
The decline in Google's click prices is partly a result of consumers' shift to smartphones, where Google's ad rates are lower than those on Google's standard website.
Google cited growing demand for its spectrum of online advertising services, including mobile ads, display ads, video ads and its newly-launched product listings, though the company did not provide specific financial results for the individual businesses.
"More small enterprises increasing their spending collectively on Google's various products," continues to drive Google's growth, said Pivotal Research Group Analyst Brian Wieser.