Alphabet (Google) Q3 Beats With $18.7 Billion, Mobile Search Revenues “Strong”
Google's paid clicks were up 23 percent but CPCs were down 11 percent.
Google announced revenues $18.7 billion, which represented 13 percent year over year growth vs. $16.5 billion a year ago. Revenues beat financial analyst consensus estimates of $18.54 billion. Google shares jumped in after-hours trading.
Total advertising revenues were roughly $16.8 billion. Google called out mobile search as a particularly strong growth driver. (See the earnings call notes below for more discussion of mobile search.)
The IAB earlier this week reported US digital revenues for the first half of 2015. Search represented 50 percent of the $27.5 billion in total ad revenue, with mobile ad revenues coming in at $8.2 billion or just under 30 percent. Google said it had nearly $73 billion in in cash and cash equivalents on hand.
Google’s Q3 paid clicks were up 23 percent overall and up 35 percent on Google websites. However paid clicks were down 5 percent on Google network websites. Traffic acquisition costs were flat at $3.56 billion.
Though paid clicks were up, CPCs were down in the aggregate 11 percent year over year. Mobile search revenue was identified as the “key highlight” of the quarter.
Earnings Call Data And Selected Remarks:
CFO Ruth Porat:
Headcount grew 16 percent year over year, mostly “engineers and product managers.”
YouTube revenue continues to “grow at a significant rate.”
Google is doing a $5 billion cash repurchase of Class C stock.
In Q4 Alphabet will start doing segment reporting, disclosing revenues and expenses for “other bets” (non-Google units).
CEO Sundar Pichai:
Google Play crossed billion-user milestone this quarter.
India is number two country for mobile search queries behind the US.
40 percent of mobile search results return app index results in the top five.
“We now have 100 billion links within apps”
Google Photos now has more than 100 million users who’ve uploaded more than 50 billion photos
More than 1.4 billion active Android users around the world.
YouTube has seen amazing momentum in mobile, largely coming from the YouTube app. Mobile watch time for selected categories (apparel and toys) has doubled this year.
Responses to Analyst Questions:
Mobile revenue growth: Porat says that mobile revenue growth is sustainable as Google innovates with new formats and user experiences (as well as expands the portion of search results allocated to ads). “We’re still in early innings.”
Can Google port its search business successfully to mobile? Porat doesn’t really answer: “We’re firing on all cylinders.”
What are the drivers of YouTube revenue growth: Pichai says mobile user growth and the shift of brand budgets to YouTube.
On mobile search growth: Pichai over the long term it’s more compelling than desktop.
On business models (ads vs. subscription) and media distribution: Pichai: we’re just trying to provide “the right user experience” and a variety of choices for users.
On the cloud computing opportunity: Pichai: every business in the world will eventually run in the cloud.
On the relationship between mobile and the desktop in the future: Pichai doesn’t answer but essentially says that Google is well positioned for the future.
On ad blocking: Pichai: it’s not a new phenomenon but it’s clear there are areas where the ad experience is getting in the way. We need to create better ad experiences especially in mobile.
On deep linking: Pichai: all early indications are that users respond well to deep links, much as they respond to web links.
Pichai: Internally all of our primary objectives are focused on mobile; I think we’re making solid progress.
On where mobile searches are happening: Pichai: We’re speaking primarily about the Google app or Google.com mobile web experience. But we’re seeing search growth on Maps and YouTube as well.
You can listen to the full earnings call and analyst Q&A below.