Alphabet, aka Google, Keeps Growing on YouTube and Mobile

Google, (Nasdaq: GOOG), also known as Alphabet has been on a roll. In its new avatar, the company appears to have put in added focus on the mobile and cloud initiative. And like the other tech players, it is also seeing impressive results from this move.

Google’s Financials

Google’s third quarter revenues grew 13% over the year to $18.7 billion, ahead of the Street’s forecast of $18.4 billion. EPS of $7.35 was also ahead of the market’s projections of $7.21 per share.

By segment, revenues from Google’s sites grew 16% to $13.09 billion. Network revenues grew 4% to $3.69 billion. Other revenues increased 11% to $1.89 billion.

Among operating metrics, aggregate paid clicks increased 23% over the year and 6% over the quarter. Paid clicks on Google websites grew 35% over the year and paid clicks on Google’s Network Members’ websites fell 5% over the year. Google now has 6 services with more than 1 billion users – Android, Search, Chrome, Maps, Play, and YouTube. Google Play became the latest member to join this club.

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 4% over the year. The continuing decline in cost per clicks is on account of the increased share of mobile advertising mix.

During the quarter, Google also announced its first share repurchase program to buy back $5.1 billion worth of shares.

YouTube’s Monetization

Google continued to push with the monetization efforts for YouTube. Google had initiated a paid model of YouTube back in 2013 by allowing users to access premium content on YouTube for a fee of $0.99 per month. But the model never took off. Last week, Google released a new subscription service for YouTube priced at $9.99 a month. The paying subscribers will be able to access YouTube ad-free and will also be able to watch videos offline, or keep playing videos when their screens are locked or when using another app. The service will be supported by many important content creators, including Time Warner’s Turner cable unit, 21st Century Fox’s Fox Sports networks, and Comcast’s NBCUniversal and will provide access to music, user-generated video, and branded third-party video.

Google does not disclose revenues from YouTube separately, but analysts estimate that the service was already generating revenues of $4 billion last year through advertising. It was yet to turn profitable though at the start of the year. YouTube has over 1 billion viewers globally each month, and if Google could be looking at a viable revenue source if it could convert a small percentage of these users to subscribers.

Google’s Mobile Focus

Google’s mobile focus is also delivering strong results. For the recently ended quarter, search traffic on mobile phones was higher than desktop search traffic worldwide. It is also seeing strong growth in mobile in emerging markets such as India. In fact, India is now the second biggest country for mobile search queries after the US.

To drive mobile usage, Google has indexed more than 100 billion deep links within third-party apps. The indexing allows Google to search within apps for information that users are looking for, irrespective of whether or not the user has installed the app or not. The search result also directs users to the install link for the app if they do not already have the app. Due to the indexing, nearly 40% of Google searches now return app indexed results in the top five results.

Overall mobile experience is also improving as Google continues to update their app. Now app developers can build in conversational voice experiences that work within the Google app. For instance, users can ask Google to play NPR, and NPR is then able to respond to the user by asking them if they want to pick up from where they left off or catch up on the latest news. Google is also working with more than 30 publication and technology partners on an open source initiative called Accelerated Mobile Pages to simplify the process of building superfast webpages for content for publishers and content creators.

Starting next quarter, Google will be announcing results as Alphabet. Google has already promised more transparency in their results, especially with business segment uses, under Alphabet’s leadership.

Till then, the market is pleased with their performance. Its stock is currently trading at $708.49 with a market capitalization of $487.22 billion. It touched a record high of $730 soon after the announcement of results.