What's wrong with Google? The search giant sent investors into a panic on Thursday when it reported disappointing third-quarter profits (down 20 percent) and sagging advertising rates. In response, share prices slid roughly 9 percent, falling to their lowest level in more than a month. What's going on? Here, four theories:
1. Investors panicked because the info was incomplete
The printer responsible for publishing Google's financials, R.R. Donnelley, mistakenly filed with the Securities & Exchange Commission four hours earlier than expected. That meant the draft was incomplete, which "might have been enough to freak out investors," says Alexis Madrigal at The Atlantic. "In the spot where the company's CEO normally has a statement, the press release read, 'PENDING LARRY QUOTE,'" referring, of course, to where remarks from CEO Larry Page would be. Later in the day, Google released a complete version of the earnings — "LARRY QUOTE" included.
2. Google's ads are becoming less valuable
Wall Street had expected cost-per-click (CPC), a key metric for ads, to have already bottomed out, says Chris Ciaccia at The Street. "That hasn't happened." The average CPC price decreased 15 percent from last year, says Claire Cain Miller at The New York Times, and 3 percent from last quarter. "That was partially offset, though, by an increase in the number of clicks on Google ads, which rose 33 percent over last year." Nonetheless, it indicates an ominous trend.
3. Mobile advertising is proving harder than it looks
In general, Google "pulls in less revenue from the advertising it places on mobile devices than it does from traditional personal computers," says John Letzing and Ben Fox Rubin at The Wall Street Journal. And more and more users are accessing Google from their phones, creating a "downward trend for advertiser prices on Google, which has caused some concern."
4. The company is feeling the heat from regulators
Google faces fairly heavy pressure from regulators on antitrust and privacy issues, says Casey Newton at CNET. A majority of commissioners at the U.S. Federal Trade Commission want to bring an antitrust lawsuit against the company. They believe that Google's search algorithm favors the company's own products over the competition. "While regulators appear unlikely to require dramatic changes at Google, the heightened scrutiny and soaring legal bills could distract the company's executive leadership, analysts say."
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- How Ronald Reagan turned America into a nation of children
- Why Mitt Romney is perfectly poised for a comeback in 2016
- The Nazi smart bomb that inspired China's most dangerous weapon
- Why is the West so afraid of Islam?
- This week I learned the moon might be littered with dinosaur fossils, and more
- The conservative battle against ObamaCare won't end with Halbig
- Girls on Film: Why audiences are responsible for the future of cinema
- Why scientists can't kill HIV
- 8 things the world's most extraordinary survivors can teach you about resilience
- Here's the schedule very successful people follow every day
Subscribe to the Week