Google's Q4 earnings rise but ad rates fall

The performance announced Thursday indicates that Google is still struggling to close the gap between the rates for ads shown on mobile devices and those on personal computers.

Advertisers haven't been willing to pay as much to reach prospective customers on the smaller screens of smartphones and tablets, but Google Inc. has been tweaking its digital marketing system so mobile and PC ad campaigns are bundled together. In doing so, Google Inc. is hoping advertisers eventually will recognize the advantages of reaching people on the go and gradually begin to pay higher prices for mobile marketing pitches.

But Google's average ad price during the fourth quarter fell 11 percent from the previous year. That was the steepest quarterly drop in 2013. It marked the ninth consecutive quarter that Google's average ad rate, also known as "cost per click," has fallen from the previous year.

Much of that erosion has been offset by more ads flowing into the system and Google's algorithms doing an even better job of showing the promotions to Web surfers mostly likely to be interested them. The total number of paid ad clicks increased by 31 percent from the previous year.

"The demand was very strong, but the pricing is still not there on the mobile side," Edward Jones analyst Josh Olson said.

Google earned $3.4 billion, or $9.90 per share, in the October-December period. That compares with $2.9 billion, or $8.62 per share, in the prior year.

Excluding costs to cover employees' stock compensation, Google said it earned $12.01 per share. That was slightly below the average estimate of $12.22 per share among analysts polled by FactSet.

Revenue rose 17 percent to $16.9 billion.

After subtracting Google's ad commissions, revenue stood at $13.5 billion, in line with analyst projections.