Google Q3 Earnings: And Now … The Rest of the Story

Shares of Google closed down nearly 8 percent today after an earnings pre-release snafu had halted trading for hours. Now we’re back on schedule, with a 1:30 pm PT earnings call led by the Google executive team.

Besides the premature release embarrassment — which Google blamed on its printer, R.R. Donnelly — Google will have to explain its financial results for the quarter, which were worse than expected. Analysts were expecting revenue of $11.86 billion and profit of $10.65 per share, but the company turned in $11.33 billion and $9.03 per share.

Google earnings calls tend to be pretty dry, but analysts have had an extra few hours to think up their questions, so let’s hope they’re extra spicy.

Here, for your viewing pleasure, are Google’s charts and graphs with the details.

1:32 pm: And, we’re getting started.

Larry Page will kick off with commentary.

“As you can hear my voice is still hoarse, so I’ll keep my remarks reasonably short. I’m sorry for the scramble today. … We had a strong quarter. I’m really happy with our business.”

We live in a world of abundant computing, Page says. Many of us feel naked without our smartphone.

People switch between their devices all day, he continues, and that disruption is an opportunity. As we switch from one sceren to multiscreens, Google has enormous opportunities to innovate and create ever better monetization, just like in search 15 years ago.

Google’s new runrate for mobile is over $8 billion. That includes revenue from users paying for content and apps, plus ads. “That’s quite a business.”

Page: Users want one consistent and beautiful experience. Screen independence is at the core of our strategy. When you’re using Chrome, switching between devices is painless.

That goes for advertisers, too. Google also wants to help them dynamically adapt campaigns across devices.

Page talks about search getting smarter. “There’s much more we can do to get you the right information at just the right time.”

1:41 pm: Patrick Pichette takes over. Had it not been for international currency fluctuation, composite growth would have been 6 percent higher.

Pichette clarifies that new mobile runrate includes ads and Google Play content as well as consumer spending on Play apps.

Now he’s doing the thing where he reads the numbers enthusiastically.

Continuing the focus on mobile revenue, Pichette notes some ads on mobile already performing better than desktop, but doesn’t go into details.

Peter breaks out that stat for a story here.

1:50 pm: Nikesh Arora with a business update.

Four major trends are driving growth: 1) rise of multi-screen consumer; 2) ability to deliver more precise answers to consumers; 3) Google offers lots of places to advertise, including brand options on YouTube and elsewhere; 4) Google’s apps/enterprise business.

1:59 pm: In response to a question about increased marketing spending, Pichette replies that Google spent a bunch on Nexus 7 marketing because it was so well reviewed.

Page talks about paid product search, says it’s a better experience for everyone.

Pichette says that margins reflect the first full-quarter effect of Motorola amortization.

Q: Have desktop searches flatlined in the transition to mobile search?

Page answers: You’re asking the wrong question. It’s not about platforms, it’s about dynamically adapting for users in the right place and right time.

Q: What happens with semantic and vertical search?

Page answers: We’d love to include more people in the knowledge graph and will do more work in that area. On vertical search, Google needs to understand searcher’s context, what concepts mean, etc. “In general we’ve found we want to build more of the experience for our users but we’re always open to working with partners.”

Page replies to a question about television that he uses and loves Google TV, but it’s still in the early stages.

Pichette says nothing has changed in Apple search relationship and traffic acquisition costs, though Apple changed the word in its search box from “Google” to “search.”

Pichette says people seem to always assume CPC declines are about mobile, but there are other reasons like network growth and emerging markets.

They don’t take the bait about how they’ll spend their cash.

Pichette said the bulk of that $8b mobile runrate is still ads.

Page says he’s excited, really excited, and quite excited about Google Fiber.

He’s about to try it himself at his home.

On the conflict between apps and search, Page doesn’t really believe it. “Over time, if we do our jobs right, you’ll have the same capabilities in both places.”

Page talks up how awesome Chrome is on mobile devices again, and how few people use it now. He’s really been hitting on this topic lately.

Page says YouTube can keep him entertained for hours. He tries to come up with the words “Gangnam style”: “It’s the recent video with the horse dancing, with 400 million views.”

Pichette is getting a bit into the financial weeds, talking about how they don’t hedge revenues, they hedge profits.

Arora on product listing ads — this is where Google just switched from regular shopping search to relationships with merchants. We have a billion products, Arora says. The listing ads bring Google closer to users’ intent because they can show reviews, pictures and pricing information.

Page talks about the early days of mobile again; Pichette says that travel and retail revenue fluctuate based on seasons and the larger market for them.

2:35 pm: Page and Pichette do their thank yous, and we’re done.