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Google Kicks Ass With YouTube

Posted on Tuesday, Jul 21st 2015

Last quarter, Google (Nasdaq: GOOG) added a new CFO to their management cadre. Ruth Porat, alumnus of Morgan Stanley, has been known for being fiscally conscious. The recent results announced under her guidance spell that sentiment. Google delivered better than expected results and instilled confidence in the market by ensuring that costs, revenue, and accounting systems are reviewed with much rigor.

Google’s Financials

Google’s second quarter revenues grew 11% over the year to $17.7 billion. Excluding Traffic Acquisition Costs, revenues for the quarter came in at $14.3 billion, marginally ahead of analyst expectations of $14.26 billion. EPS of $6.99 was also ahead of the market’s projections of $6.70 for the quarter.

By segment, revenues from Google’s sites grew 13% to $12.4 billion. Network revenues grew 2% to $3.62 billion. Other revenues increased 17% to $1.7 billion.

Among operating metrics, aggregate paid clicks increased 18% over the year and paid clicks on Google websites grew 30% over the year. Paid clicks on Google’s Network Members’ websites fell 9% over the year. The Street had forecast total paid clicks growth of 14% over the year.

Aggregate cost per click fell 11% and cost per click on Google websites fell 16% over the year. Cost per click on Google’s Network Members’ websites fell 3% over the year. The decline in the cost per clicks was attributed to the continuing change in the mobile and desktop advertising mix as mobile search volumes for Google were now bigger than their desktop volumes.

YouTube’s Growth

During the quarter, Google continued to provide more details on YouTube’s results – and what a quarter it was for them. YouTube saw advertising watch time for video ads grow 60% over the year, which analysts believe, is the fastest growth ever recorded by the segment. Mobile views for YouTube nearly doubled during the period. They also revealed that an average viewing session on mobile for YouTube was now more than 40 minutes. YouTube’s TrueView ads are delivering strong results. Google reported that the number of channels earning six figures per year on YouTube has increased 50% over the year.

Google does not break out revenues for YouTube yet. But analysts estimate that YouTube brought in revenues of $4 billion last year compared with $3 billion in 2013. The platform sees more than 300 hours of video uploads every minute and has now become bigger than any of the cable channels in the country.

Google’s Mobile Expansion

Google continues to invest in mobile monetization opportunities. Recently, they announced the addition of “Purchases on Google” capability – a button that lets users purchase a product from the search results itself. Thus, users can search for the product on Google, swipe the ad that interests them, and directly purchase the product based on the payment media details that are stored for their accounts. The service has been deployed by nearly a dozen brands including names like Staples and Under Armour. Some believe, that if successful, Google could pose some serious threat for Amazon.

Google is also investing in improving search within third-party apps through indexing. They now have 50 billion links within apps indexed. Nearly a quarter of signed in Google searches on Android now return links that take users directly to the content or the links within the app that they were looking for. They also started showing these links in search results on iOS.

For marketers, they released a Universal App Campaign that lets developers reach users across Google Search, the AdMob Network, mobile sites, YouTube, and Google Play. Marketers would just need to define their ad content, target audience, and their budget, and Google’s systems will compute the best possible advertising solution to get them maximum results within these parameters. They also introduced new mobile ad formats such as automobile ads that take the viewer to a carousel of vehicle images and show important details such as estimated mileage and local dealer listings. They continue to improve their video ad format for YouTube and introduced a new feature for TrueView that lets marketers automatically insert product information, images, and pricing into video ads.

Last week, Google also announced the release of Eddystone, an open source format for Bluetooth LE beacons to compete with Apple’s iBeacon standard. Beacons are a low-cost small piece of hardware that use Bluetooth connections to transmit locally relevant messages. Most stores are using these beacons to send consumers information on product offers available in the brick and mortar store. Unlike Apple’s iBeacon, Google’s Eddystone will be able to work on both Android and iOS platforms and will be able to support multiple data payloads at once. Thus one beacon will be able to deliver multiple messages to devices.

Their stock is trading at $663.02 with a market capitalization of $452.45 billion. It touched a record high of $699.62 soon after results announcement, growing 16.3% – their highest recorded growth in a single day since April 2008. The growth was attributed to the stellar performance on paid clicks growth, YouTube’s strong results, and the confidence instilled by the new CFO on maintaining focus on expense management while ensuring revenue growth.

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