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November 05, 2012

Google Warns that as Mobile Ad Revenue Grows, Desktop Ad Business Suffers

By David Gitonga, TMCnet Contributing Writer

Who can refute the fact that mobile ad revenue is growing at a rapid pace? Google (News - Alert) is no doubt benefiting from this shift. Currently, the new industry is worth $8 billion to Google. However, there is a downturn to this. Even as the company continues to grow its mobile ad revenue, this has come at a cost to its desktop ad revenue, which has seen a decline, negatively hurting its sales.

The drop in desktop ad revenue and the rise of mobile is not surprising, as more mobile search queries and an increase in mobile commerce have continued to be affected by evolving consumer preferences. According to the company, the rise in mobile ad revenue has come at a cost where click prices on mobile tend to be cheaper. This supply and demand problem has resulted in increased mobile searches which increases the available inventory supply for advertisers. This also results in lower prices due to the greater supply. This has, in turn, hurt Google’s growth revenue on the top line.

Image via Shutterstock

The full disclosure from Google uses the word “deceleration” to explain what has been taking place with its desktop ad revenue. The company revealed that as the shift from offline to online continues, it expects its business to grow despite the declining revenue growth rates. Google, however, was clear in pointing out that it will continue to aggressively invest in new business strategies, products, services and technologies.

As the online advertising market evolves, the increased online advertising platforms have also contributed to the declining ad revenue. Consumers are using multiple devices to access information and mobile commerce continues to grow dramatically around the world.

Google also pointed to the general economic downturn which may have resulted in fewer commercial queries that caused advertisers to reduce their spending on online advertising. Google, however, was not shy to point out that it will continue focusing in its core strategy areas as it has always done.

Edited by Brooke Neuman
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