Google Disappoints on Slowdown of Advertising Growth

Heavy spending, a slowdown in advertising growth and a higher tax bill has led to quarterly results that were disappointing for Google, which brought down the shares of the search behemoth of Internet.

Google announced that revenue for the third quarter was $16.52 billion, which represented an increase of 20% over the same period from last year. However, it was less than the $16.58 billion Wall Street was expecting.

Net income was down 5.3% to end the quarter at $2.81 billion equal to $4.09 per share, from the $2.97 billion equal to $4.38 per share for the same reporting period in 2013.

The results included the Motorola Mobility unit of Google that it has agreed to sell to Lenovo Group of China and classifies as an operation that is discontinued.

Excluding the Motorola unit and other specials expenses, Google had earnings of $6.65 per share. Analysts were expecting $6.53 per share for that basis.

Google is the online leader in advertising because of its search engine that dominates the Internet giving marketers important clues on things people want.

Because of that, there has been a steady growth in both revenue and profit. However, the company has large expenses while investing in acquiring businesses to maintain its growth.

Results for the short term are hurt by spending and spark concerns amongst Wall Street analysts. While Google revenue was up 20% during the just ended quarter, expenses jumped up 28%.

Amongst expenses, R&D saw its costs soar by 46%.

Google is spending to build more data centers so more Internet content can be delivered. Capital expenditures were $7.4 billion during the first 9 months of 2014, which was an increase of 45% over the same period a year ago.

Hiring is taking place at Google at an alarming rate. Not including Motorola, Google increased its payroll by 2,980 employees during the past three months to reach 51.564 employees.

Google’s business of search advertising remains profitable. However, newer ventures such as display advertising, YouTube, and projects that are long term have profit margins that are much lower.

Shares at Google dropped 2% on the news in trading after hours.