Google Gets Android on More Than 95 Devices to Boost Ad Sales

Google Inc. has landed its Android software on more than 95 handsets, up from about 60 in May, helping sales chief Nikesh Arora in his bid to generate revenue from mobile advertising and other businesses besides Web search.

The company benefits as more manufacturers, such as Motorola Inc., use the Android operating system in smartphones and as marketers spend more on ads aimed at device owners.

“We are at a very nascent stage in mobile advertising,” Arora said this week in an interview. “The more you’re concerned about your return on investment -- and you’re going to spend more on advertising -- we like it.”

Arora, 42, is using mobile and display advertising to lessen the company’s reliance on search, which makes up most of its revenue. Google, owner of the most-used engine for finding information on the Web, faces rising competition for advertising dollars from Facebook Inc. and Microsoft Corp.

“There’s a lot of pressure that they need to accelerate growth in nontraditional ways, and they’re starting to do that,” said Mike Hickey, an analyst at Janco Partners Inc. in Greenwood Village, Colorado, who rates the stock a buy and doesn’t own it.

Google is also relying on display ads, including video clips and graphic banner ads that appear alongside text on Web pages. Google, which had $27.6 billion in sales in the last four quarters, said last week it expects to exceed $2.5 billion in annual display-ad sales and $1 billion in mobile-ad revenue.

Photographer: Chris Ratcliffe/Bloomberg

A user pushes the menu button on a Sony Ericsson Xperia X10 smartphone running Google Inc.'s Android operating system in London. Close

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Photographer: Chris Ratcliffe/Bloomberg

A user pushes the menu button on a Sony Ericsson Xperia X10 smartphone running Google Inc.'s Android operating system in London.

Google, based in Mountain View, California, declined 61 cents to $607.37 at 2:05 p.m. New York Time on the Nasdaq Stock Market. The shares had fallen 1.9 percent this year through yesterday.

Brand Awareness

To expand in display advertising, Google purchased DoubleClick for $3.24 billion in 2008. That business has increased the daily number of ads it serves by 300 percent in the last four years, according to Google.

The mobile and display businesses, which have some overlap, helped the company top sales estimates in the third quarter. Revenue, excluding sales passed on to partner sites, was $5.48 billion, exceeding the $5.26 billion average of estimates compiled by Bloomberg.

Google needs display advertising to attract advertisers that want to raise awareness of a brand -- not drive an immediate online purchase, said Andrew Frank, an analyst at Gartner Inc. in New York.

“There’s a long-standing belief that sight, sound and motion are important to convey the emotional aspects of a brand,” he said. “It’s of course difficult to do that with textual search ads.”

Android Gains

Google bulked up in display through the 2006 acquisition of YouTube, the most visited U.S. video-sharing site. The number of videos being watched that can be monetized -- or targeted with ads -- exceed 2 billion on a weekly basis, up more than 50 percent from a year earlier, Google said last week.

The company bolstered its display capabilities in the past year through acquisitions, including Teracent, which tailors ads for online users, and Invite Media, which helps customers place ads via exchanges on websites more effectively. The company is open to more acquisitions, Arora said.

“We’re happy with all the stuff we have right now; we’re working hard at delivering,” he said. “If there’s something interesting that comes up, it’s very important to not shut the door.”

Android, which Google acquired in 2005, has surged in popularity among consumers, overtaking Research In Motion Ltd.’s BlackBerry to become the top smartphone operating system in the U.S. in the second quarter, according to Gartner. It’s more widely used than Apple Inc.’s mobile software.

Google, which doesn’t charge for Android, sells advertising tied to searches, and applications and mobile sites, including games and entertainment, used on smartphones that run Android. Google also generates mobile ad sales from the placement of ads on other mobile operating systems, including those of RIM and Apple.

“Android is hugely profitable,” Google Chief Executive Officer Eric Schmidt said during the conference call last week.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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