During a conference call with analysts following Google‘s (GOOG) Q1 report, chief financial officer Patrick Pichette�walked Street through details of the company’s “cost per click,” or CPC, a key metric of the search ad business that has received increased scrutiny since Google’s Q4 report.
Q4 saw the first year-over-year decline in CPC in more than two years, causing it to become a major point of concern for investors.
CPC in Q1 declined again, falling 12%, year over year, and 6%, quarter over quarter, the company reported.
Addressing CPC, Pichette remarked, “The most important thing for you to understand is that our business is healthy. We believe that shifts in CPC and paid clicks taken independently really do not reflect the fundamental health of our business.”
Pichette said the change was a result of five different factors, including foreign-exchange effects, the shift in search activity from desktop computer to mobile computer, from established, mature markets to emerging markets, and the shifts that happen between Google’s owned properties and the network of affiliates featuring its ads.
And changes in the ads that Google shows against search results, meaning, more relevant results, have a “huge effect” on the cost per click, said Pichette.
Pichette in a sense offered a warning to Street analysts, who he said too often tried to boil down the matter of CPC changes to just one or two of those factors.
In a sense, he said, understanding this stuff is complex, don’t try it at home:
So the dynamics around CPCs and paid clicks are just simply very complex because of all of these big factors and chain continue continually so trying to pick a horse so-to-speak just doesn’t make sense. We internally track all these factors. Who dig into all these details on an ongoing basis. So we won’t go into that level of detail every quarter. But again, the key thing to understand is that we believe that shifts in CPC or paid clicks taken independently simply don’t reflect the fundamental health of our business which we believe is actually very healthy.
Pichette said the issue was not one of weakening demand, as “One important signal we have for advertiser demand is bidding behavior,” referring to the auctions where ad buyers secure listing in Google search results.
“And in fact, our advertisers’ bids continue to be very strong and are growing.”
Google shares are up $2 at $653.01 in late trading.