Alphabet’s growth continued in the second quarter as companies bought more ads on its search engine and other products, while users clicked more on those ads.
Advertisement
Google parent Alphabet said on Thursday its second quarter profit jumped 43 per cent from past year to US$4.9 billion, in results that lifted shares of the internet giant. Advertising accounted for US$19.1 billion in revenue.
Alphabet, the parent company of Google, saw sales from its so-called moonshot projects hit $185 million in the quarter ending in June, more than doubling sales from the same quarter a year ago.
Google in the quarterly report mentioned that it is now reaping the results of the shift towards a mobile focused scenario, and clicks on ads that Google shows to users increased 29% year-on-year. Shares of Alphabet gained more than four percent in extended trading and are close to a fresh 52 weeks high. Much of the revenues and growth predictably came from Google’s advertising business. While not as stellar as Apple ($7.81 billion) or Samsung ($5.2), it did beat Microsoft ($3.1) and Facebook ($2.1) comfortably with $4.88 in net profit on $21.5 billion revenue, which is an increase of 21% over the Q2 2015 revenue.
Pichai also hinted at the future direction for Google, saying that while today, “mobile is the engine that drives us”, the company is looking to machine learning for future growth.
Alphabet houses the more experimental branches of the company, like Nest, Google’s self-driving-car project, and Google Fiber, a high-speed Internet endeavor. “We now have key leadership in place and centralized teams”, Pichai said. Analysts on average were expecting revenue of $20.76bn, according to Thomson Reuters.
Although Google continues to expand its advertising business, the falling cost-per-click on advertisements is cause for concern, said analyst Patrick Moorhead of Moor Insights & Strategy.
“Once again, the primary driver was increased use of mobile search by consumers, benefiting from our ongoing efforts to enhance the mobile search experience”, she told investors, adding that desktop and tablet search, YouTube and programmatic advertising were also strong. On the company’s earnings call, CFO Ruth Porat confirmed that cloud and apps drove most of the growth of other revenues.
In the second quarter, operating losses from those divisions, classified as “Other Bets” in Alphabets financials, totaled $859 million, widening from $660 million a year earlier.
Advertisement
That performance, which followed strong Facebook results, prompted this CNBC story on how Google and Facebook are basically raking in nearly all the money being made in digital advertising – though that could changed if Verizon has its way following the Yahoo acquisition this week.
