Alphabet (formerly Google) beats on earnings, thanks to mobile search and programmatic advertisement growth

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Dive Brief:

  • Google parent company Alphabet, Inc. posted strong third-quarter earnings on Thursday that beat analyst expectations and sent the company’s shares to record highs in extended trading.
  • Driven by strong growth in mobile search and programmatic ads, overall Q3 revenue for the company rose 13% over the same period last year. Google also reported that the overall number of paid clicks rose 23%, but cost-per-click fell 11% for the quarter.
  • During an earnings call with analysts, Google CEO Sundar Pichai told investors he was confident in Google’s ability to deliver ads to people at relevant moments, adding that he anticipates mobile search ads might become “as compelling or even better than desktop.”

Dive Insight:

“Our value proposition to markets of all sizes is simple,” Google’s Pichai said on the earnings call. “Google can help you show the right ads to the right people at the right moment.”

The main takeaways from Alphabet’s earnings report are clear: Google’s bread and butter — search ads — are proving effective on mobile.

However, analysts have been worried of late that the unintended consequence of mobile growth is a decline in cost-per-click, which fell 11% this quarter. It looks like those worries may have misplaced, as CFO Ruth Porat attributed the drop in cost-per-click to the growth of YouTube TrueView ads, Google’s skippable pre-roll ad offering.

Porat noted during the call that both TrueView ads and Google Preferred, which allows brands to buy ads on top YouTube channels, have seen significant growth. Pichai called video “a profound media shift” and said that advertisers have been very responsive. “We are getting great traction there…[as brands are] moving traditional budgets to YouTube,” he said.

Programmatic ads are an area of growth for Google that is “on fire,” according to Pichai. Programmatic ad revenue has nearly doubled in the past year, with 80% of the top 100 advertisers buying ads programmatically from Google.

One more thing to note for marketers is that Google says it isn’t worried about ad blocking, though it did acknowledge that, as an industry, they need to work on poor ad experiences.

The better-than-expected earnings come at a time of transition for the Internet behemoth, which is going through a restructuring under the newly created holding company Alphabet. All the core Internet businesses — search, advertising, maps, YouTube and Android — will remain part of Google under the new company structure.

“They’re in a great position in the overall advertising space, whether it’s search, display or mobile. They’ve got the right program to continue to grow at a solid pace and be dominant in those spaces,” Kerry Rice, a Needham & Co analyst, told Reuters.

This quarter marks the first earnings report for the new Alphabet parent company and the last before the Internet businesses start reporting separately under Google.

P.C. –

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