Google Q1 2019 Earnings: Fewer Clicks and Slowing Growth

May 1, 2019

They say all good things eventually must come to an end. And for Google, it was their long streak of 20+ percent revenue growth rates going back several years.  

Google reported its Q1 earnings this week and reported revenue growth of 17% (19% on a constant currency basis).  On the earnings call, executives cited several factors that contributed to the slight deceleration, including strong growth a year ago as well as product innovations that resulted in fewer clicks this past quarter.  

They repeatedly emphasized that the company develops products for the long term and has a rigorous testing process. They also explained that product changes aren’t timed specifically for quarters and should be expected to have impacts like this from time to time. As Ruth Porat, Google’s CFO, stated: “We will continue to make changes with a focus on the long-term best interest of users and advertisers.”

Highlights from the quarter include:

  • Revenue increased 17% for the quarter (19% on a constant currency basis) and was $36.3 billion.  
  • Other revenues were up 25%, which includes Cloud, Play and hardware (Home, Pixel, etc.) and were $5.4 billion.
  • Operating income was $6.6 billion, a decline from a year ago due to an additional fine from the European Commission of $1.7 billion.
  • Hiring continued and Google now has over 100,000 employees.
  • Paid clicks increased 39% on Google properties.
  • Average cost per click (CPC) was down 19%.

One area we follow closely is the trend in click growth.  In the retail space, we continue to see Google make changes, such as larger product carousels for PLA’s, Shoppable Image ads and Showcase Shopping ad formats (in addition to Shopping Actions and Express).

This growth rate has been averaging about 50% in the past couple of years — peaking at 66% in Q4 of 2018. In Q1, however, this slowed considerably to 39%.

Clearly 17% growth is still impressive and Google is without a doubt the most “sure thing” when it comes to providing traffic for brands and retailers.  That said, it will be interesting to see if the decrease in clicks is a one quarter event or indicative of a longer term trend.

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