Google 4Q Earnings Reflect Increasing Mobile Focus

Google Inc.’s (GOOG) mobile strategy appears to be paying off.

The Internet search engine giant has branched out into the wireless world with its Android operating system and Nexus One phone, and this newer focus helped contribute to the company’s better-than-expected fourth-quarter earnings.

Google late Thursday reported net income of $1.97 billion, up significantly from the $342 million during the year-ago period, and higher than Wall Street’s projections. Sales skyrocketed too – up 17 percent to $6.7 billion due, in large part, to strong AdSense revenue.

But perhaps the most interesting growth stemmed from Google’s mobile efforts. The company’s mobile search traffic has increased by five times in the past two years thanks to sales of devices running Android. The Motorola Droid, in particular, has had notable success since launching on the Verizon Wireless network last fall.

Google’s also pinning its mobile hopes on the Nexus One smartphone, an iPhone rival. That device wasn’t introduced until early this year, so its effects should be seen in Google’s first quarter 2010 earnings report. And, to be sure, the results will be interesting. Google is getting an earful from buyers over customer service problems, T-Mobile 3G network troubles, and steep upfront and early termination costs.

In the meantime, Google has other mobile plans underway. For example, it intends to integrate location-based services more deeply with mobile advertising and commerce so consumers can buy products locally if a store’s inventory shows items are available.

“We already have some examples where advertisers like AT&T are using some of our local products to help people find local stores,” Jonathan Rosenberg, senior vice president of product management, said in Google’s conference call with analysts. “I think we are just starting to get there in terms of capabilities that are going to be necessary for local to take off. But I think local is going to matter much more on these devices because obviously they know where they are with GPS.”

In addition to a solid quarter, Google also enjoyed a good year overall. Net income totaled $6.5 billion and revenue rose to $23.65 billion, up from $21.8 billion in 2008. The company ended the fourth quarter of 2009 with $24.5 billion in cash and 19,835 full-time workers, up from 19,665 full-timers in at the end of the third quarter.

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