How Facebook And Apple Are Attacking Google's Earnings

(Photo Credit: keso s)

Google reports third quarter earnings Thursday, October 16 after the market closes. Tech investors will be looking to Google to sooth their jitters by putting up a strong quarter driven by flourishing mobile ad sales.

 

In July Google (GOOG) reported earnings of $6.08 per share for its second quarter. Profits jumped 27% compared to the same quarter of last year, but still failed to live up to the aggressive expectations of investors who were looking for EPS of $6.25.

This quarter, 104 contributing analysts on Estimize have come to a mean consensus for Google to record profits of $6.56 per share, topping the Wall Street consensus by 10 cents. If Google does record the ten cent beat that contributors are looking for, that would represent a 22% profit increase from the third quarter of 2013. 

At the same time, Estimize contributors are looking for Google to report revenue of $13.406 billion while Wall Street is predicting $13.218 billion. If the Estimize community is correct sales will increase by 12% on a year over year basis, down slightly from 14% increase reported last quarter.

 

Google failed to live up to the hype in July, but still expanded at a much faster rate than the S&P 500 index which registered year over year profit growth of about 11%. This summer analysts and investors were counting on mobile and video advertisements to power a home-run quarter for Google. In the end it was a decent quarter for Google, but shareholders will be hoping that the tech giant can surpass expectations this afternoon to calm their nerves amid turbulent market conditions.

One of the key metrics to watch for Google is their cost per click. Google controls monopoly-like market share in PC and mobile search, maintaining pricing power there is vital. Last quarter Google’s aggregated cost per click was flat year over year, while falling 6% sequentially from the previous quarter.

If you thought Google had a racket going in PC search, you should see their market share on mobile. According to Forbes Google controls about 90% of mobile search market share. With the proliferation of mobile connectivity that we’ve seen in recent years, it’s safe to assume that mobile search will be a winning segment this quarter and should contribute significantly to the projected 12% top line gain. 

The main reason why Google has been so successful in mobile is the global dominance of its Android mobile operating system. Since 2011 the penetration of Android on mobile devices has skyrocketed from 36.1% to 84.7%. However, Google’s grip on mobile search may not last forever. There’s a lot of buzz around Apple’s (AAPL) iPhone 6 and the iPhone 6 Plus, which may claw back some market share for iOS. 

On another competitive front, Facebook (FB) just relaunched its Atlas platform, which steps up the pressure on Google’s cross platform advertisement dominance. With Atlas Facebook will now be able to track personal data across multiple devices, enabled more effective ads for its customers. Atlas and the new iPhone both launched late into this quarter, so don’t expect Google to crash and burn just yet. With 2 legitimate threats on the horizon and deteriorating investor confidence in the market, Google needs to put up big numbers today.