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Google Stepping Up Video and Mobile

Posted on Monday, Jul 23rd 2012

According to recently released report by the Interactive Advertising Bureau (IAB) and PwC, online advertising spending grew 22% over the year to $30 billion in 2011. The last quarter of 2011 was the best ever quarter, with online advertising spending of $9 billion. For the first time last year, Internet advertising spending surpassed spending on cable television. Within online spending, mobile and video are gaining more ground. Mobile was the fastest growing segment and reported an increase of 149% last year to $1.6 billion. Digital video advertising grew 29% to $1.8 billion in 2011. Search remained the largest contributor for advertising dollars as it grew 27% to $14.8 billion. Search engine giant Google is benefiting from these trends.

Google’s Financials
Google’s (NASDAQ:GOOG) Q2 revenues grew 21% over the year to $8.36 billion, somewhat shy of the market’s expected revenues of $8.41 billion. Excluding traffic acquisition costs, revenues grew 21% to $11 billion. Including the impact of the earlier acquisition of Motorola Mobility, revenues grew 35% over the year to $12.2 billion. EPS of $10.12 was ahead of the Street’s target of $10.04.

Google website revenues grew 21% over the year to $7.5 billion and the company’s network revenues grew 20% to $3 billion. Other revenues grew 42% over the year to $439 million. Global aggregate paid-click grew 42% over the year, while the aggregate cost-per-click was down 16% over the year.

Aiming to Set New Standards for Online Ads
Google offered several new products to users. For advertisers, the company released the Brand Activate initiative, which some believe could be a new standard for online advertising. Brand Activate consists of two new services for advertisers: Active View and Active GRP. Active View measures how long an ad remains on a user’s screen and for how much of that time it is viewed. To be an Active View, at least 50% of the ad needs to be viewable for at least one second. Active GRP, or the active gross rating point metric, is similar to advertising ranking for TV advertising. Through these initiatives, Google will be able to drive increasing advertising dollars in the brand space.

Google is also pleased by the traction it has seen on YouTube and is stepping up efforts to increase viewership. Yearly account signups for YouTube doubled over the year. Google’s statistics showed that users are uploading more than 72 hours of video every minute. This quarter the company also released a new YouTube app for Android that will help users find videos and follow channels from their mobile and tablet devices. As part of its Olympics coverage, YouTube will power NBC’s live streaming of the Olympics in the U.S. and will also live stream the games in London to 64 territories around the world.

Last month, Google also announced the launch of Nexus 7, a new 7-inch tablet. This is the company’s first self-branded tablet. Given its small size, analysts believe that Nexus 7 is good for emailing, web surfing, and downloading applications. Google, however, claims that Nexus is a strong gaming device as well. Nexus 7 will also be the first tablet to operate on Google’s latest Jelly Bean Android software. It will come with a 1.2-megapixel camera and will be available in 8GB or 16GB memory versions.

Google’s Acquisitions
Google also continued its acquisition spree and added several smaller startups to its kitty. As part of its expansion in the mobile segment, it acquired Quickoffice, a provider of its mobile productivity suite for Android and iOS. Quickoffice lets users create and edit Microsoft Word, Excel, and PowerPoint documents on their mobile devices. At the time of acquisition, Quickoffice software was already installed on more than 300 million devices in more than 180 countries. Google plans to leverage the acquisition with its own Apps product suite.

Last month, Google acquired social networking player Meebo for an estimated $100 million. Meebo has a messaging app, a social toolbar, and a following of more than 100 million in the U.S. Google plans to use Meebo’s social publishing strengths to improve their initiative of Google+. Google+ has managed to gain users and now has over 170 million users, however, Google is worried about user engagement on the network.

Google’s stock is trading at $610.82 with a market capitalization of $199.14 billion. It touched a 52-week high of $670.25 in January 2012.

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