Google Q4 results completely crush analyst expectations

Boom. Looks like anyone who thought that Google was losing its way financially just got a slap to the brain. The internet giant announced its Q4 2012 results and things look good, very good.

The Mountain View-based giant announced revenues of US$14.2-billion, more than the US$12.3-billion that analysts were expecting. Had Motorola Home been included, says Google, that number would’ve jumped up to US$15.24-billion.

Google’s revenues, which represent a 36% jump on 2011, were heavily bolstered by its own sites. They generated revenues of US$8.64 billion, or 67% of total Google revenues, in the fourth quarter of 2012. This represents a 18% increase over fourth quarter 2011 Google sites revenues of US$7.29-billion.

Its partner sites meanwhile generated revenues of US$3.44-billion, or 27% of total Google revenues, in the fourth quarter of 2012. This represents a 19% increase from fourth quarter 2011 Google network revenues of US$2.88-billion.

“We ended 2012 with a strong quarter,” said Larry Page, CEO of Google. “Revenues were up 36% year-on-year, and 8% quarter-on-quarter. And we hit US$50-billion in revenues for the first time last year — not a bad achievement in just a decade and a half. In today’s multi-screen world we face tremendous opportunities as a technology company focused on user benefit. It’s an incredibly exciting time to be at Google.”

In the earnings call, the company placed a lot of emphasis on YouTube. “Video is a key language that brands speak. YouTube is well positioned for the changing habits of today’s multi-screen viewing world,” said Google Nikesh Arora. “YouTube is also good for big brands,” he said, adding that the top 100 global companies advertising with Google, “spent 50% more on YouTube in 2012 than the year before.”

The reason Google couldn’t include Motorola Home in its results, which it sold to the Arris Group for US$2.35-billion in December, because the deal is only expected to close later this year. When the deal goes through, it will be a significant boost to the internet giant’s revenues.

Even revenue streams which haven’t been performing well over the last little while saw an increase the last quarter. While Cost-per-Click advertising decreased approximately six percent over the fourth quarter of 2011, it did increase approximately two percent over the third quarter of 2012. According to Larry Kim, CEO of online marketing company Wordstream, it’s actually a good thing that CPCs aren’t moving too much:

“I’m thrilled that average CPC’s are near flat both from the previous quarter and previous year. It’s great news for advertisers since big increases in CPC are tough, particularly for small and medium-sized advertisers,” he said.

Some of the other key figures include:

• Paid Clicks — Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its network members, increased approximately 24% over the fourth quarter of 2011 and increased approximately 9% over the third quarter of 2012.
• TAC — Traffic acquisition costs, the portion of revenues shared with Google’s partners, increased to $3.08-billion in the fourth quarter of 2012, compared to $2.45-billion in the fourth quarter of 2011. TAC as a percentage of advertising revenues was 25% in the fourth quarter of 2012, compared to 24% in the fourth quarter of 2011.

Looking to the future, Google reckons there’s opportunity to engage more fully in the mobile space than it already has.

“When you drop your phone, it shouldn’t go splat,” said Page. He reckons that the company has a “real potential to invent new and better experiences. I expect mobile to revolutionize how people do marketing. So we’ll be able to make a lot more money than we do now.”

Looking a little bit further, Page noted that the pace of innovation was increasing all the time and that he was especially looking forward to what new search technologies like Google Now could eventually end up producing. “Wouldn’t it be great if we could answer all your questions on the earnings call before you even asked them?,” he said.