Google Defends Mobile: Android Costs Are “Not Material”

Analysts pelted Google (s GOOG) executives with concerns about mobile advertising effectiveness and revenue generation on the company’s quarterly earnings call today. Google’s growth in cost-per-click was only 2 percent during the quarter, compared to 4 percent a year ago. Google admitted that mobile may be dragging down its average CPC, but said that mobile clicks are growing more quickly than any other area.

As for how Google’s investment in its Android mobile platform will reap rewards, Google CFO Patrick Pichette said, “Android in terms of cost is not material to the company.” He noted that recent Android launches like the Droid X were undertaken completely by partners like Motorola (s MOT) and Verizon (s VZ). “It’s a formidable return in that what you have is the entire market exploding.”

Meanwhile, even though Google proudly notes that there are now 70,000 Android apps, SVP product management Jonathan Rosenberg reminded analysts that by far the most popular application on phones is the browser, and that mobile search is up an order of magnitude. Pichette said Android is both an “offensive” and “defensive” effort for Google, and that it gives the platform away for free to help grow the market.

Rosenberg pointed to a couple factors that will help mobile value grow, noting that new ad formats like click-to-call are very promising. He said that the logistics of authenticating and consummating transactions on mobile need to be improved. The overall mobile system should “move very aggressively to acquire more of those commercial transactions,” Rosenberg said. For more on that topic, see our recent GigaOM Pro piece on mobile payments (sub req’d). Rosenberg also noted that due to the small screen size on mobile “a display ad really gets in your face” — and Google just acquired AdMob to get more deeply into that space.

It’s unclear how much of an elephant in the room Apple’s (s AAPL) iAd is, since it went unmentioned. But one thing’s for sure, mobile is no longer a wee emerging aspect of Google’s business, and analysts and the markets are going to hold the company accountable for its growth.