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Google shares surf ad-destroying mobile tsunami to RECORD HIGH

Page wishes he knew how to throw MORE money on fundamental research

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The shift to mobile gadgets is eating into advertising revenue worldwide – but that hasn't stopped ad giant Google reporting whopping sales of $14.89bn, driving its shares to a record high.

The web advert-slinger today reported its earnings for the third quarter of 2013, and showed growth in key lines of its business. The company's revenues beat analyst estimates by a cool $100m, and its earnings per share of $10.74 were significantly above the $10.34 foretold by beancounters. It reported a net income of $2.97bn, far above the $2.18bn it reported in Q3 2012.

"I find I'm spending most of my time now on mobile and not so much in the desktop world," CEO Larry Page said on an earnings call discussing the results. "I think we're very well positioned in mobile... I'm tremendously excited, I think we have potential to make [mobile users] experiences much more efficient and pleasurable."

At the time of writing Google's shares were up seven percent in after-hours trading, reaching a high of $957.

The company's revenues of $14.89bn were up 12 percent on the same quarter a year ago, and way above the $13.97bn it reported for the previous quarter.

For the past three-month period, the company reported ad revenues of $9.39bn, representing 68 percent of the money made in its total Google segment (for now it treats Motorola as a separate division).

Paid advert clicks rose 26 percent compared with the third quarter of 2012, but the cost-per-clicks fell 8 percent on Q3 2012 – a trend spurred by the switchover by users to mobile devices, which have thinner margins. On the call, the company said 40 percent of YouTube views now come from mobile devices.

Traffic acquisition costs (payments for driving visitors to Google) totaled $2.97bn, representing 24 percent of advertising revenues.

There were also encouraging signs in its other business divisions, with its "other" revenues – strategically important small products such as Apps, Chromebooks, Google Play, and so on – growing to $1.23bn, up 85 percent on the same quarter a year ago and far above last quarter's $1.05bn.

The "other" segment is Google's way of protecting itself from being overly dependent on advertising, but due to the scale at which the company operates and the dominance it wields over the online advertising market, growing this number enough to truly diversify the company's business has proved difficult.

Overall the US represented 56 percent of Google's revenues, compared with 53 percent in Q3 2012. The UK represented 10 percent, down from 11 percent in Q3 2012.

Motorola Mobility segment revenues plummeted to $1.18bn from $1.78bn in the third quarter of 2012 as Google continued to redesign the recently acquired company and wire it closely into its Android division.

Capital expenditures rocketed up to $2.29bn for the quarter relative to $1.6bn in Q2 2013 and $1.2bn in Q1 2013, as the company sought to buy new IT gear, build out more data centers, and purchased some strategic real estate.

Google chief Page said on the call that he wouldn't be doing as many earnings calls in the future, joining a club populated by other mercurial business leaders like Steve Jobs, Jeff Bezos, and Larry Ellison.

He also said he wished he could find a way to spend more money on fundamental research and development, breaking from a fashion of under-investment or incremental projects done by other companies. "You should be asking me to make more significant investments," Page said. "I wish I knew how to do that. It's difficult to spend meaningful amounts of money relative to Google scale." ®

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