Google+ — the company's recently-launched social network — has 90 million users now, up from 40 million three months ago. Android is now the world's most-used mobile software platform, ahead of Apple Inc's
Google's new focus on social networking
Google's heavy investments in mobile and social network initiatives — to stave off competition from rivals Apple and Facebook — and its planned $12.5 billion acquisition of smartphone maker Motorola Mobility Holdings Inc
Several analysts pointed to longer-term growth trends in social networking and mobile usage that should boost advertising volumes for Google and offset any margin erosion. “The areas where we're seeing the most growth, Google has a really. really good strategic position. So even though there may be some changes in terms of pricing fluctuations, they'll probably make it up in volume,” Jacob said.
“Strategically, they're at a very interesting spot, whether you look at the desktop space, or the mobile space.”
Google shares were down 9 percent at $582.00 in heavy afternoon trade on Friday on the Nasdaq. They had touched a low of $581.83. It was the stock's biggest percentage fall in 9 months. Google executives blamed the decline in search ad rates on forex fluctuations and ad format changes, but analysts wondered whether mobile advertising — which has lower rates — played a more important role than the company admitted. The fall in cost-per-click had led to a barrage of questions from analysts during the post-earnings conference call on Thursday. The market needs to shift expectations to paid-click growth — primarily in plain-vanilla display or banner advertising — and lower its estimates for CPC, Goldman Sachs analysts said in a note.
Several Wall Street analysts called the Google sell-off an overreaction; Barclays said it presents a buying opportunity. “Don't judge a book by its cover,” Goldman Sachs titled its research note on Google. The company's core results were solid, as paid click growth accelerated by more than a third, margins improved, and display and mobile businesses performed well, analysts said. The acceleration in paid clicks suggests that underlying demand for Google ads is quite healthy across devices, JPMorgan said, adding that Google is best-positioned for the shift to new media. Goldman Sachs analysts said: “We expect the growth in mobile to be 146 percent in 2012 and represent 15 percent of gross sales as we exit fourth quarter of 2012.” The company still has strong earnings power that will reappear during 2012, Canaccord Genuity said, reiterating its “buy” rating. Barclays, Baird, Jefferies and JPMorgan also maintained their top ratings on the stock.