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Google's Never-Ending Search For Higher Prices

Tickers in this article: AAPL FB GOOG YHOO

NEW YORK ( TheStreet) -- Google's second-quarter earnings report , was initially met with heavy selling, as that most telling of metrics, costs-per-click, continue to decline.

Investors, however, may be missing the forest for the trees.

Google earned $9.56 per share on $11.1 billion in revenue, excluding traffic acquisition costs. When those costs, which Google shares with its partners, are included, the company generated $14.11 billion in revenue for the quarter. Analysts were looking for $1.078 per share on $11.billion, excluding traffic acquisition costs.

Much of that earnings miss came from the continued restructuring going on at Motorola, investments in Google's future and a higher tax rate. The restructuring at Motorola will continue to take time but investing in Google's future, particularly on projects such as Google Fiber, makes long-term sense for shareholders.

On the earnings call, CFO Patrick Pichette said Google will "always have profitability as one of the key criteria" when it comes to entering a business. Google is doing the right things by investing in the long-term future of its company, even if expenses rise in the short-term. That's something investors should welcome, not deter.

While costs-per-click declined, Google made sure to note that paid clicks, which include clicks related to ads served on Google sites and the sites of its network members, increased approximately 23% year-over-year.

The main point is this: there is still considerable growth ahead for Google's core business, which is advertising. Google's core revenue rose 20% year-over-year. When you factor in that the stock, which is up 26% since the start of the year, is only trading at 20 times earnings, that's not terribly expensive. This stock still has a lot of upside.

"They have a solid business model that has been adversely affected by mobile adoption in terms of advertising revenue but what they offer is better than anything that Apple and Microsoft have available at the moment," said Warwick Business School Associate Professor John Baptista in an email. "So I think this is a bleep in the long term performance of the company, and I don't see how it reflects any major flaws in their strategy and product line."

The mobile advertising business is still weak, Earnings results from Yahoo! earlier this week confirmed that. Next week, we see if Facebook can escape the trend.

However, Google has more going for it, then just advertising. The company is entrenched in nearly every way of the Internet, almost a tech holding company at this point. It has the world's most dominant mobile operating system, beating Apple's iOS. It's diversified into hardware, with its purchase of Motorola. YouTube is on fire, with Nikesh Arora noting that "YouTube's mobile revenue in June of this year was three times what it was at the beginning of the year." The Google Play Store just recently surpassed 50 billion app downloads, and continues to gain traction.