Speaking on the company’s post-earnings conference call, Google (NASDAQ:GOOG) CFO George Reyes said the company has found that “social networking inventory is not monetizing as well as expected,” leading to higher than expected traffic acquisition costs. TAC of $1.4 billion was 30.3% of ad revenue, up from 29.1% in the third quarter.
This has huge nasty implications for social networking sites which I suspect you will be hearing a lot about in the days ahead.
Some other details from the call:
Gross revenues were up 51% in the quarter. Google properties revenue was up 58%. Adsense revenue was up 37%, negatively impacted by quality improvements to Adsense. Paid clicks were up 30% year over year, and 9% sequentially.
International was $2.3 billion, or 48% of total revenue.
Headcount rose 889 people in the quarter.
Non-GAAP operating margins were 35%, down from 36% in the third quarter, due to the higher TAC.
Cash flow was $1.7 billion; cap ex was $678 million, bringing free cash flow to $1 billion.
After hours, Google is down $47.30, or 8.4%, to $517.