Google announces lower than expected revenues and profits for its first quarter

Online advertising rates remain soft - especially for mobile - warns Google

Internet giant Google reported consolidated revenues of $15.42bn in the first quarter of 2014, up by 19 per cent compared to the first quarter in 2013. However, it missed targets as a result of higher-than-expected spending combined with lower-than-expected advertising revenue.

Margins have slipped as a result, with advertising prices under constant pressure, particularly as the company pushes into new markets where rates are lower. Advertising rates on mobile devices and apps are even lower than standard online apps, said Google chief business officer Nikesh Arora, although he was confident that prices would rise to match the price of standard online advertising.

While Google has expanded into multiple disparate areas, site revenues remain the biggest earner for the company with revenues of $10.47bn or 68 per cent of the total. Partner sites generated a further $3.4bn in advertising revenues for Google, while "other" revenues weighed in at $1.55bn. UK revenues, meanwhile, totalled $1.58bn or 10 per cent of the total.

Increased costs includes a rise in research and development, up by 31 per cent to $2.13bn, as well as "general and administrative". Total costs rose by $2.1bn to $11.3bn.

Google also reported a $198m net loss from "discontinued operations", which includes Motorola Mobility, which the company is selling to Chinese PC maker Lenovo for $2.91bn - a steep discount on the $12.5bn that Google paid for the mobile phone maker in August 2011, even if Google is retaining the company's intellectual property.

At the time of the acquisition, Google claimed: "Google is great at software; Motorola Mobility is great at devices. The combination of the two makes sense and will enable faster innovation."

Google CEO Larry Page had described that deal as a "natural fit for our two companies".