Alphabet Inc, Google's parent, revealed that efforts to push its vast advertising business toward mobile is paying off as second quarter earnings handily beat Wall Street's expectations.
The results put to rest lingering concerns about how the rise of mobile might impact Google, which has a strong mobile presence with its Android smartphone operating system but has long relied on desktop search traffic to power its profits.
Mobile landscape Advertisers typically pay less for user clicks on mobile ads than on desktop ads, Google's traditional strength, but the strong earnings performance suggests that is beginning to change, said Colin Gillis, an analyst with BGC Partners.
“They're doing an excellent job of pulling the mobile landscape through to being more efficient,” Gillis said.
Alphabet said revenue grew by 21.3 per cent to $21.5 billion, while earnings jumped to $4.88 billion from $3.93 billion for the comparable period a year ago.
Robust gains in the red-hot video market also drove the company's growth, Google Chief Executive Officer Sundar Pichai said during a call with investors. Over the past year, Google, Facebook and Twitter have all doubled down on video, a format where advertisers are willing to pay a premium for a few seconds of users' undivided attention. Google has used artificial intelligence to improve video recommendations to users, driving more engagement on the site, Pichai said.
Video thrives “Video is a huge component of digital content, and YouTube continues to shine,” he said. “It's a thriving home for creators.”
Google and other tech players are hoping to siphon advertising dollars from traditional television, where advertisers will spend a projected $70.6 billion in the U.S. this year, according to market research firm eMarketer. YouTube is in a prime position to strike, with an audience of more than 1 billion users, including more 18-34 and 18-49 year-olds than any U.S. cable network.
Google faced heightened pressure to deliver after Facebook, its chief competitor in mobile advertising, reported a 63 percent increase in total advertising revenue on Wednesday, sending its shares to an all-time high.
The rivalry between the companies has intensified as advertisers shift more of their budgets toward mobile. But Google's healthy performance shows there is room for both to thrive in the burgeoning market, said Bob O'Donnell of TECHnalysis Research. “The back-to-back, stellar earnings by both Google and Facebook highlight the continued growth of online advertising and its impact on more traditional media,” he said.
