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Google Q2 2018 Earnings: Firing on All Cylinders

Google’s parent company Alphabet released its Q2 results this week with continued strong growth of revenues. Overall revenues increased 26% versus last year (23% on a constant currency basis), which maintained Q1’s growth rate. The company is fresh off its Google Marketing Live event in early July (more on that below), and in the words of CFO Ruth Porat, Google’s advertising business continues to be “firing on all cylinders as we put the power of machine learning into marketers’ hands.”

All in all, Google saw continued steady growth, which is all the more impressive when you consider the size of Google’s business.

Some of the highlights from the quarter include:

  • Revenue increased 26% for the quarter (23% on a constant currency basis) and was $32.7 billion.
  • Net income was impacted significantly by the recent fines imposed by the European Commission related to Android (we won’t cover those here). From an advertiser perspective, a better measure of Google’s profitability is Free Cash Flow, which was $4.2 billion, down just slightly from Q1 ($4.3 billion).
  • Paid clicks increased 58% on Google properties.
  • Average cost per click (CPC) was down 22%.
  • Other revenues were up 37%, which includes Cloud, Play and hardware (Home, Pixel, etc.)

We attended Google Marketing Live in San Jose earlier this month, so we were able to hear the latest on how Google is thinking about the future of advertising and retail.

The overall theme put forth in the keynote address by Google’s Senior VP for Ads Sridhar Ramaswamy was how Google is focused on “advertising that works for everyone.” To achieve this, Ramaswamy believes that advertising should be valuable, offer transparency and be trustworthy. This philosophy extends across all elements of the platform — from Search to YouTube and everything in between.

Google announced a few key innovations at the event, most of which continue on the theme of Artificial Intelligence and Machine Learning being a force for creating better advertising. One example we are already leveraging for our advertisers is Responsive Search Ads. These text ads are powered by machine learning and are able to test numerous variations of ad creative to find the one that works best.  

Additionally, features like Smart Campaigns and Smart Shopping Campaigns were positioned as a way for small businesses to more easily participate in Shopping Campaigns.  

Finally, as we mentioned last quarter, the new Shopping Actions program is another key part of Google’s strategy for marketing in what it calls “the age of assistance.” Throughout Q2, we saw more ads for Google Express show up in search results, and the growing momentum of Shopping Actions is a trend we’ll be watching closely over the next few months.

With the crucial holiday season approaching, we would definitely recommend any advertisers and sellers jump on this program now, so you’ll be ready for the busy season ahead and not left wondering where your usual search traffic has gone.

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