The Google Ad-vantage

Google owes 87.5% of its 2014 revenue to its online advertising business and during the fourth quarter of the year, ads accounted for 89.2% of the company’s income.

Although primarily a search engine and technology development company, Google’s good fortune has been undoubtedly supported by the rise of people’s engagement in ads on Google sites. Each year there is around a 25% increase in paid click advertising on Google.

The portion of advertising income that the company shares with its affiliates or Google’s traffic acquisition costs (TAC), were up by 9.4% over the last quarter of 2013 or a total of 3.62 billion US dollars. But this only accounts for 22% of quarterly revenue, while in the last quarter of 2013, Google’s TAC was up 24%.

In the meantime, Google’s other products and services like apps and media sales in the Play Store and Google’s cloud computing services fees have brought in revenues of 1.95 billion US dollars, which increased by 18.6% from the previous year’s final quarter.

adwordsGoogle has heavily invested in building out its data centers for the future of their cloud computing services. In the fourth quarter, it has spent 3.55 billion US dollars on property and equipment in the fourth quarter last year, which was 57.5% more than in the same quarter in 2013. Expenditures for property and equipment were 11 billion US dollars for the whole year. Google also increased its staff by 4% over the third quarter’s figure, with full-time employees reaching 53, 600.

Although Google’s advertising and other businesses have been very successful, their 2014 revenue and income had surprisingly missed their mark amid rising costs. In the last quarter of 2014, they managed to earn a 15.3% increase in sales amounting to 18.10 billion US dollars. Google had earned a total of 66 billion dollars for the entire fiscal year of 2014 which was significantly higher than 2013’s sales by 18.9%.

Quarterly sales for the tech giant has never been this impressive but it was still not enough to appease financial analysts who were expecting to see 18.46 billion US dollars of quarterly revenues. Google said that this supposed “loss” was because of the strengthening of the US dollar. If international exchange rates had remained consistent, its revenues might have been higher.

But there was little to worry about really. If we see it from a profit perspective, Google’s net income for the fourth quarter last year was up by 40.9% from 2013’s final quarter. 2014 has been a great year for Google and 2015 will surely have more surprises in store with new platforms being launched plus the comeback of some technological exploits that have inadvertently failed in the past.

For Google’s future investments, they said that they will continue to find ways for a healthy balance between growth and discipline and the eagerness and determination to settle down when certain limits have been reached in their capacity to absorb what remains manageable.

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Stefan
Stefan