Mobile’s The Word! Google’s Q2 Earnings Wrap-Up

August 1, 2016

Digital Marketing ChannelAdvisor By ChannelAdvisor

“The strength of the quarter is about mobile”  – Google CEO Sundar Pichai

 

Several years ago at one of Google’s I/O conferences, Larry Page famously remarked that he could run Google from his phone, citing the technological advances and general pervasiveness of mobile.  He encouraged Google product managers and engineers to spend a day a week only using their phones to better understand what a “mobile only” experience consists of.  

Google’s (er, Alphabet’s) Q2 results are a sign that this strategy has not only been embraced by the company but has transformed how all of us interact with Google.

Note: While results are reported overall for Alphabet, we’ll focus on Google, which accounts for 99% of the company’s total revenue.

Google reported earnings late last week and had a very strong quarter, the highlights being:

  •        Revenue rose 21% (25% in constant currency) to $21.5 billion in Q2
  •        Net income was $4.9 billion
  •        Overall clicks increased by 29% (clicks on Google-owned sites such as Google.com and YouTube were up 37%)
  •        Average CPC declined 9%

Similar to Facebook’s results, the story of the quarter is really the growth of mobile.  We’ve seen Google make several changes centered on mobile advertising already this year – dropping the right-hand rail of search results, introducing expanded text ads and adding bid modifiers for each device type to better take advantage of valuable mobile ‘real estate’. All of these changes are designed to improve the consumer experience on mobile while also making it easier and more effective for marketers to advertise on mobile.

The challenge that Google has faced for the last several quarters has been that offsetting the significant increase in mobile traffic is the fact that CPCs typically are much lower on mobile compared to desktop.  This quarter still saw a decline in CPCs, albeit at a slower rate — suggesting that advertisers (and Google) are doing a better job of monetizing mobile search.

From a geographic perspective, all of the major markets that Google is in saw growth – the US grew 25%, the UK 14% and the ‘Rest of the World’ was up 19%, according to the earnings call.

Google doesn’t break out performance by ad type but we know from our data here at ChannelAdvisor that Product Listing Ads (PLAs) continue to drive significant growth. These are well suited to mobile and combined represent the area of the most significant growth for many retailers.  

We’ve seen Google continuing to innovate within their PLA program, most recently introducing Showcase Shopping Ads which are designed to help a brand or retailer tell their story on the queries that are higher in the funnel.

Another key parallel to watch between Google and Facebook is the ability to target specific audiences.  Google announced in May the introduction of Similar Audiences for Search. These build on Remarketing Lists for Search Ads (RLSA) and have the potential to provide a strong performance similar to Lookalike Audiences on Facebook.  

The key takeaway for retailers and brands is that the shift to mobile isn’t slowing down. If you aren’t making investments in mobile advertising and user experience, you’re only falling further and further behind the competition as time passes.

All in all, Google continues to show steady, solid growth, particularly in mobile.

   

Blog post by Link Walls, VP of product management at ChannelAdvisor