Google's mobile strategy hardly failing

John C. Tanner
28 Nov 2012

OTT giants Google and Facebook last month created much dithering on the web over their respective quarterly financial results. In the case of Google that was partly the result of accidentally leaking its numbers early. But in both cases the common denominator was how their respective mobile business models performed.

Facebook reported that its ad revenue grew 36% to $1.09 billion in Q3 (compared to 28% growth in Q2) - and that 14% of that came from mobile ads. That comes to $150 million in Q3, compared to between $40 and $50 million in Q2, and close to zero in Q1. And that's via a base of 604 million mobile monthly active users (MAUs) during the quarter.

Facebook CFO David Ebersman noted during the earnings call that news-feed ads generated $4 million a day in revenue, with three-quarters of that from mobile. And while desktop ad revenue is dropping, Ebersman credited that to the shift of advertisers to the mobile platform.

Google, meanwhile, reported a net income of $2.2 billion for Q3, down from $2.7 billion year-on-year. It also reported the average cost-per-click dropped 15% in the same time frame.

A number of financial analysts were quick to put the blame squarely on mobile. Aside from pointing to the fact that mobile ads generally rake in much less per click than desktop/laptop ads, some analysts also criticized Google for being too dependent on browser-based ads rather than in-app ads, and trying to apply its search advertising model to mobile, which involves a different use case.

Does that mean that Facebook is getting mobile right and Google isn't? Hardly. What it means is that Wall Street was displeased with Google's Q3 results and looked for something to blame. But to conclude that Google's mobile ad strategy is floundering is a major stretch.

Even with the overall cost-per-click down, Google's mobile ad run rate rocketed from $2.5 billion in Q3 2011 to $8 billion in Q3 this year. Granted, that was boosted by additional mobile revenue from users buying content and apps in Google Play, but according to the Wall Street Journal (citing a Barclays analyst), the vast majority of that figure comes from ads. That's not chump change.

And frankly, the majority of players in the mobile ad space wish they were doing nearly as well as Google. As Forrester Research analyst Charles Golvin told the WSJ: "It's a bit facile to point the finger at Google and say look, you guys are dropping the ball in this critical area… Nobody is demonstrably ahead of them in capitalizing on this trend of mobile."

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