News that a Malaysia Airlines passenger plane had been shot down over unrestricted Ukrainian airspace spooked investors on Thursday. The S&P 500 fell 1.2%, putting an end to a 62-day streak of less-than-1% up-or-down moves in the benchmark index, the longest such streak since 1995. The narrower Dow Jones Industrial Average (DJINDICES:^DJI) lost 0.9%, while the technology-heavy Nasdaq Composite Index (NASDAQINDEX:^IXIC) was down 1.4%. In stock-specific news, Google (NASDAQ:GOOG) reported second-quarter results after the bell, and they are being well received. Google shares were up more than 1% in the after-hours session, following a 1.7% drop during the ordinary session that roughly mirrored the Nasdaq's performance.
First, the numbers: Google realized $16.0 billion in gross revenues, a 22% year-on-year increase, and 2% ahead of Wall Street analysts' consensus estimate. Earnings-per-share came in at $6.08 on an adjusted basis, and although this represents 23% growth with respect to the year-ago period, it's 3% shy of the $6.24 consensus estimate. The number of total paid clicks rose 25% year on year, compensating for the 6% decline in the average price advertisers paid for each click (the "cost-per-click").
The cost-per-click appears to have stabilized during the first half of this year. Although it fell throughout 2013, it has now notched up its second-straight quarter during where it is flat sequentially. That suggests the economics of Google's ad business may be settling, even as users continue to shift from PCs to mobile devices. Ads on mobile devices are typically less effective than those displayed on PCs, so they command a lower cost-per-click.
Google gobbles up a third of total digital ad spending worldwide, leaving its nearest competitor, Facebook (NASDAQ:GOOG), far behind, with 8%, according to data from market research firm eMarketer. However, that gap is less with regard to the mobile ad business, specifically, where Facebook is growing faster than Google.
Nonetheless, Google is better positioned to compete in a "mobile-first world" -- to borrow Microsoft's expression -- than Yahoo! (NASDAQ:YHOO). On Tuesday, Yahoo announced a 4% year-on-year revenue decline, with the Display and Search businesses experiencing 8% and 2% declines, respectively. Little wonder that the earnings press release opened with a statement from CEO Marissa Mayer according to which, "Our top priority is revenue growth and by that measure, we are not satisfied with our Q2 results."