Google Earnings Reveal Beginnings of a Facebook Problem on Search Revenue

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Google beat Wall Street expectations with its fourth-quarter revenues of $14.42 billion, but the value of its ads continue to decline, an especially tricky problem with the company's new search competition from Facebook. Google's average cost-per-click decreased 6 percent from one year ago, meaning each ad it runs on its biggest business has less value than it did a year ago, continuing a fairly troubling trend for the search giant. It still managed to keep up its paid clicks by getting more and more people to use Google.

Google has managed to offset the decline in click value with that kind of growth for almost a year now, but Facebook's new Graph Search has the potential to offer users more personalized social-search results — and that could mean higher value for the ads next to them. How much longer can Google can maintain its delicate balance by sheer market power remains to be seen. The company is trying desperately to change its fate with a push for more Google+ integration, which would put advertisers closer to more personal Googling. But so far that hasn't worked, if the earnings report is any indication. Google's bet on volume will surely face a test from Facebook's gamble on the future of social search, no matter what the rival CEOs are saying.

This article is from the archive of our partner The Wire.