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Google Q2: $16B Revenue, CPCs Down, SVP Nikesh Arora Leaving
This afternoon Google announced second quarter consolidated revenues of $15.96 billion. That represented a 22 percent increase vs. last year and 3 percent growth since last quarter.
Revenues were higher than expected ($15.61 billion) while earnings per share missed financial analyst estimates. Paid clicks were up significantly; CPCs were down YoY but flat quarter over quarter.
The release also indicated that SVP and Chief Business Officer Nikesh Arora would be leaving to become Vice Chairman of SoftBank Corp. and CEO of SoftBank Internet and Media. Omid Kordestani will take over his role “for now.”
The following are the top financial highlights from the release:
- Google sites: $10.94 billion (69 percent of total), up 23 percent YoY
- Network: $3.42 billion (21 percent of total), up 7 percent YoY
- International: $9.33 billion (58 percent of total) up 3 percent YoY. UK revenues were $1.62 billion (10 percent of total) which were flat YoY
- Other revenue: $1.60 billion (10 percent of total) up 53 percent
- Paid clicks: increased 25 percent YoY (up 2 percent vs. Q1). Network paid clicks (on non-Google properties) up 9 percent
- CPCs: decreased 6 percent YoY but were flat vs. Q1
- TAC: $3.29 billion in Q2 vs. $3.01 billion a year ago
Here’s the full text of the release on CPCs:
Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our Network members, decreased approximately 6% over the second quarter of 2013 and remained constant from the first quarter of 2014. Cost-per-click for Google sites decreased approximately 7% over the second quarter of 2013 and decreased approximately 2% over the first quarter of 2014. Network cost-per-click decreased approximately 13% over the second quarter of 2013 and increased approximately 3% over the first quarter of 2014.
Earnings Call Notes
Here are selective notes from the earnings call:
Google’s CFO Pichette:
- The company now had more than 52,000 employees
- Free cash flow for Q2 was $3 billion
- Motorola had a “great Q2” with the Moto G and Moto E showing “strong results, especially in emerging markets”
SVP Nikesh Arora:
- Retail a very successful vertical in the quarter
- 3X traffic to merchants from PLAs in mobile vs. last year
- Video is at the forefront of our efforts (cites premium video exchange)
- Cities Google My Business and SMB market as a major effort
- 60% of Fortune 500 use Google’s enterprise products
- Over 1 million Chromebooks sold into schools in Q2
- Thanks everyone at Google for his 10 years at the company
Question re YouTube revenues based on report in The Information. Pichette wouldn’t comment on revenues but cited a “great future ahead” for YouTube.
Question re Google Shopping Express. Arora: we’re learning, we’re experimenting; people love the service. There’s “amazing demand for the product,” says Pichette.
Question on Google Play and its outlook. Arora: is now available in 90 countries; “it’s the binding glue for the Android ecosystem.” No guidance regarding margin or profit opportunity.
Question about app indexing and Android wear + TV: Expect us to “most aggressively” pursue app indexing across screens. Suggests that there will be more search advertising around apps and app discovery in the future as a result of app indexing. Makes bland statement about providing consistent experience for user across screens.
Question about headcount growth (2,400 added in Q): Pichette says Google will continue to “look around the world for the best engineers.” Vast majority of hiring is in engineering and product management.
Question about smartphone penetration and search revenue: Arora: we’re at the beginning of the revenue opportunity; mobile currently doesn’t monetize as well as desktop. In the future it should be better than desktop.
Question re Google Fiber: costs have come down. Trying to keep costs of construction down. Currently working with 34 separate cities to prepare for next wave of construction. Still tbd about ultimate market rollouts.
Question re competition in cloud services: Arora: still early; we have great products; we’re focused on making our products great, not worried about competition.
Question re CPC price growth: Pichette says the company is focused on quality and CPCs should “creep back up” over time. Cites geographic variability (emerging vs. mature markets) and suggests emerging market CPCs will grow. Decline has slowed; QoQ flat.
Question re SMB focus: Arora: we have millions of advertisers and publishers we deal with. We’re trying to help SMBs drive traffic online and offline. Cites mobile and the need to get SMBs mobile. Trying to support SMBs around the world. A long-term strategic effort to bring them onboard. Teams doing a “phenomenal” job.
Question re Chrome vs. Android: Pichette: converging in many ways; both teams under Sundar’s leadership. When you think of multi-screen, both these OSes are complementary. Chrome for enterprise; Android for mass market.
Question re Google Shopping Express: SMBs part of the focus; not the only focus however. It’s about local.
Question re professional content on YouTube; how important: Arora: has all forms of content (including professional content) available today. Our monetization model for YouTube is working. More efficient than TV. We continue to experiment with other models (subscription, paid content) to see what “sticks” with users.
Pichette pushes back against assumption in a question that market is shifting to mobile. He says it’s really “multi-screen” and stresses Google’s reach across screens.
The questioning ends with Arora thanking everyone again.