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Google: Network Revenues Take Hit on Policy Changes to AdSense

Puneet Sikka

Google in the First Quarter: Will Strong Currency Slow Growth? (Part 4 of 10)

(Continued from Part 3)

Google Network revenues and AdSense

In Part 3 of the series, we observed how mobile search is driving revenue growth on Google’s (GOOG) (GOOGL) own websites. Google’s Network website business revenue grew by a year-over-year rate of 6% in 4Q14. As the chart below shows, this year-over-year growth has slowed over the last couple of quarters.

During the 4Q14 earnings call, Google explained that the slow growth in its Network business was mainly due to policy changes it made that affected its legacy AdSense business. Google didn’t reveal exactly what the changes were, only that changes were made to benefit user experience. The actions resulted in a negative impact to growth in the number of clicks. But this was offset by a higher cost per click for these ads.

Google’s AdMob and DoubleClick showed robust growth

Despite the slowdown in the AdSense business, its other businesses within the broader Network segment—AdMob, DoubleClick, and AdExchange—grew at a fast rate according to the company.

AdMob is an ad program that allows mobile application developers monetize their apps. Until a few months ago, developers used Google’s AdMob program to show ads, along with an app that encouraged users to download other apps. Facebook (FB) App Links technology and Twitter (TWTR) mobile-app install ads program are similar to Google’s AdMob. This feature is available for both Android and Apple (AAPL) iOS users.

Google recently added some new features to AdMob that can help advertisers re-engage with users once an app is downloaded. Advertisers can now deep link their Google search, Google Display Network, and YouTube ads directly into their mobile apps.

We will discuss the DoubleClick program in the next part of our series.

For diversified exposure to Google, you can invest in the PowerShares QQQ Trust, Series 1 (QQQ). QQQ invests 3.75% of its holdings in Google.

Continue to Part 5

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