For the past few quarters, Google's finances have been the story of same-old, same-old: Desktop search -- its biggest business -- is getting stale, but it still makes billions.
The story stayed true on Thursday when Google reported lagging revenue, as more people find what they want from their smartphones and tablets. And as competitors, including Facebook, draw more of the mobile users that advertisers are trying to court.
For the sixth time in seven quarters, Wall Street analysts still weren't wowed by the company's performance. Google, the world's largest search engine, said sales, excluding traffic acquisition costs, were $14.48 billion. Profit, minus some costs, was $6.88 a share. That fell short of analysts' estimates of $14.7 billion in revenue and earnings of $7.12 per share.
Patrick Pichette, Google's chief financial officer, said on a conference call with analysts that the company faced "a few real challenges" in the fourth quarter, but touted the strength of its core search business.
The company's stock fell more than 2 percent at one point in after-hours trading, but bounced back after Pichette concluded his remarks. At 2:30 p.m. PT, shares were at $521.25, after closing at $510.66 in regular trading.
Google's lower sales during the holiday quarter highlighted CEO Larry Page's inability to grab significant gains outside of its juggernaut search and advertising business for desktop computers, which account for up 90 percent of its revenue. The desktop continues to be the cornerstone of Google's business, concerning analysts and investors who worry about that area becoming outdated.
Google handily wins when it comes to global digital advertising market share overall. The company had more than 31 percent of the market last year, while its closest competitor, Facebook, had almost 8 percent, according to eMarketer.
But Google faces a two-edged problem in mobile advertising. It makes less money from mobile ads and its share of the mobile market is shrinking. It dropped from 46 percent in 2013 to 40 percent last year, according to eMarketer. Meanwhile, Facebook's share climbed 2 percentage points to 18 percent last year. Facebook said Wednesday that mobile revenue accounted for almost 70 percent of its $3.85 billion in ad sales.
Google doesn't break out revenue specifically related to mobile. But the growth of paid clicks -- an important metric for Google because it gets money every time someone clicks on an ad -- has slowed. The metric grew only 14 percent from the year before. In 2013, it grew 31 percent year over year. Cost-per-click, the amount of money Google gets each time you click on its ads, continued its downward trend, falling 3 percent year over year.
Google has been trying to think outside the search box. In October, Page took a step back from day-to-day management duties, ceding much of his control over the company's most important products -- including maps and search -- to Sundar Pichai, a longtime trusted lieutenant. The reason? Page said he wanted to focus on Google's future.
That's why Google has invested so much lately on audacious projects like self-driving cars, smart contact lenses, and Wi-Fi balloons that beam out Internet connectivity. Those initiatives, all developed in the company's secretive Google X lab -- as well as more down-to-earth initiatives like the Google Play marketplace -- fall under a category Google calls "other revenue." That figure made up 11 percent of the company's overall sales last quarter, the same as the quarter before.
Glass and beyond
One of those projects is Google Glass, the company's Web-connected headset. The high-profile device was introduced with much fanfare by Google co-founder Sergey Brin during a conference in San Francisco in 2012.
But since its debut, the gadget has been met with both fascination and scorn. Privacy advocates have cried foul over its included camera; culture critics have coined the term "Glasshole" for overly enthusiastic wearers of the device.
Earlier this month, Google said it was discontinuing sales of the prototype version of the gadget. The company insisted it was continuing to work on the product, but reorganized the team's structure. Google put Tony Fadell, co-founder of the smart-device company Nest and former Apple hardware guru, in charge of the group.
Google acknowledged some of the device's shortcomings on Thursday. "When the teams aren't able to hit hurdles, but we think there's still a lot of promise, we might ask them to take a pause and take the time to reset their strategy," said Pichette. "As we did recently in the case of Glass."
The company also has ever-increasing telecommunications ambitions, with the ultimate goal of expanding its user base and gaining revenue. Earlier this month Google joined with Fidelity to invest $1 billion in Elon Musk's SpaceX, which aims to launch a fleet of lightweight satellites for Internet service. And Google also earlier this week expanded the reach of its Fiber broadband project to 18 more cities. The service, meant to rev up Internet connection speeds, is coming to new places including Atlanta and Nashville.
Google is also reportedly interested in becoming a wireless carrier itself. The company is said to be in talks with Sprint and T-Mobile, the third- and fourth-largest mobile carriers in the country, to sell and manage consumers' mobile data plans.