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Google Faces Challenges Growing Mobile Ads In Developing Countries

October 18, 2014 - Written By Jeremiah Nelson

Google is making money hand over fist, but there are problems they are facing in the mobile ad space. Revenues are still growing and probably won’t stop anytime soon. Last quarter, Google reported revenues of $16.52 billion, which is a 20 percent increase year-over-year. This was actually just under analysts’ projection, but no one is complaining. Google’s net income was also a little low, but not by much. Third quarter income came in at $2.81 billion. Along with revenues and net income being slightly down, their ad clicks are down a bit too. Year-over -year growth on ad clicks was up 17 percent, but last quarter saw a 25 percent YOY increase. That’s a good bit less that analysts were expecting. These numbers could be an indication of the slowing of their core advertising business. Some of the problem is that clicks on mobile ads are slowing.

As the company grows into developing areas like India and Indonesia, more and more users are jumping on Google’s platform. The problem comes from the fact that the ad market in those countries is not as developed. “The problem is they get more traffic coming from Indonesia and Turkey and places where there’s not as developed an ad market, so pricing is lower,” said Martin Pyykkonen, an analyst at Rosenblatt Securities. “Countries like that are mostly mobile traffic, so it just suppresses the number.” This means that Google has to tweak their approach to making money in these developing markets. Google isn’t worried about it, though. “It took many years, for example, for the desktop ecosystem to develop the right ad formats and really take advantage of the platform,” said Omid Kordestani, Google’s Chief Business Officer. “So I think we just need to continue innovating here, experimenting here to get it right.”

Google is working out ways to make money at the same time that they are seeing massive growth in developing markets. Android One is the major mobile push that Google has aimed at Asia and other developing areas. As the mobile market grows, new opportunities are opening up. Google is going to have to find new ways to take advantage of those opportunities so it can hold on to its core business: advertising.