Alphabet/Google revs up advertising, boosts profits
San Francisco (AFP) – Google parent Alphabet beat expectations Thursday with robust profit growth for the past quarter, fueled by gains from its leading online advertising platform on mobile devices.
Second quarter profit jumped 43 percent from last year to $4.9 billion.
Revenue increased 21 percent to $21.5 billion, the California tech giant said, in results that topped most analyst forecasts.
Alphabet chief financial officer Ruth Porat called the results “terrific” and said they “reflect the successful investments we’ve made over many years in rapidly expanding areas such as mobile and video.”
“We continue to invest responsibly in support of our many compelling opportunities,” Porat said in a statement.
She said the gains came mainly from “increased use of mobile search by consumers, benefiting from our ongoing efforts to enhance the mobile search experience.” She also cited “solid growth in desktop and tablet search as well as continued strength in YouTube and programmatic advertising.”
Alphabet shares rallied 5.6 percent in after-hours trade on the results.
The company announced a reorganization last year that left Google as its main operating unit within Alphabet, with several others representing “moonshot” investments in new areas.
The Google segment nonetheless produced almost all the revenues — $21.3 billion — and operating profit of $6.9 billion. Advertising accounted for $19.1 billion in revenue.
The “other bets” line item showed $185 million in revenue and an operating loss of $859 million.
The new structure gives the tech giant more ability to focus on its core business, while offering startup-like flexibility to long-shot, trailblazing projects.
They include self-driving cars, “Google Glass” smart spectacles, internet balloons, drones, health care and Google TV — none of which have become a major revenue source.
– Advertising machine –
But Alphabet’s bread and butter comes from online advertising, where Google dominates the market.
The research firm eMarketer estimates that Google accounts for 30.9 percent of the total worldwide digital ad market and 55 percent of search advertising, which is linked to its leading search engine.
Google unit chief Sundar Pichai told a conference call that “the strength of the quarter was about mobile.”
Mobile, he said, “has transformed the way that people consume information and Google’s products have become an essential and much loved part of the experience.”
The tech giant’s Android operating system dominates the smartphone market with a share of around 80 percent, which enables Google to offer search and other services to handset users.
Analyst Colin Gillis at BGC Partners said Google still has room to boost revenue.
“We remain highly positive on Google’s ability to monetize its large user base including seven products with over one billion users each,” he said in a note to clients this week.
“Mobile clicks are likely to see increased monetization as Google continues to experiment with formats and presentation.”
But Google’s success and dominance have also prompted scrutiny from regulators. The European Union recently opened a third investigation accusing Google of unfairly blocking rivals in online advertising.
EU officials are also probing Google’s dominance in Android and whether it harms rivals in online shopping.
The rise of Google/Alphabet, which is vying with Apple to be the world’s most valuable company, has coincided with a steep decline for Yahoo, which this week announced a sale of its core operations to Verizon for $4.8 billion, a far cry from Alphabet’s market value of more than $500 billion.