Google earnings up 36% despite cheaper ad prices

Google's earnings climbed 36 per cent despite a deepening slump in its average ad prices as advertisers purchase a growing number of cheaper commercial pitches to reach people who connect to its search engine and other services on mobile devices.

The results released Thursday exceeded the analyst projections that steer investors. Google's stock surged by more than six per cent after the numbers came out.

Google Inc. earned nearly $3 billion US, or $8.75 per share, during the three months ending in September. That compared to income of $2.2 billion, or $6.53 per share, at the same time last year.

If not for its expenses for employee stock compensation, Google said it would have earned $10.74 per share. That figure topped the average estimate of $10.36 per share among analysts polled by FactSet.

Advertisers won't pay as much for mobile ads

The Mountain View, Calif. company's average ad price has declined from the prior year in each of the last eight quarters primarily because advertisers aren't yet paying as much for mobile ads because the screens on smartphones and tablet computers are smaller than on laptop and desktop computers.

As more people rely on mobile devices to connect to the Web, it's driving down Google's average ad price, or "cost per click."

In Google's latest quarter, that measure fell eight per cent from last year in the latest quarter. That was worse than the 6 per cent year-over-year drop in the previous quarter.

Revenue up 12%

Although Google is getting less money per ad, it's getting paid more frequently as people click on more of the commercial pitches. Google's number of paid clicks soared by 26 per cent from last year, an indication that the company's data analysis is doing a good job matching ads with the interests of its services' users.

Revenue for the third quarter rose 12 per cent from last year to $14.9 billion. After subtracting commissions paid to Google's ad partners, Google's revenue stood at $11.9 billion about $227 million above analysts' predictions.

Google's stock gained $58.71, or 6.6 per cent, to $947.50 in extended trading. If the stock reacts similarly in Friday's regular trading session, the shares will reach a new all-time high.