Google Q3 2018 Earnings: A Quarter of Milestones

Google’s parent company Alphabet released its Q3 results last week and also crossed several significant milestones (more on that in a bit). Overall revenues increased 21% versus last year (22% on a constant currency basis), which represented a deceleration from last quarter’s 26% growth.

While numerous controversies have swirled around Google of late (accusations of bias, European regulatory penalties, employee walkouts) the business continues to grow significantly and, in the words of CFO Ruth Porat, was “…led by mobile search and our many products that help billions of users around the world.”  

As a long-time watcher of Google, I think it’s clear that it’s trying to shift its messaging to emphasize the value it brings to consumers across its many products.

Some of the highlights from the quarter include:

  • Revenue increased 21% for the quarter (22% on a constant currency basis) and was $33.7 billion.
  • Other revenues were up 29%, which includes Cloud, Play and hardware (Home, Pixel, etc.).
  • Operating income was $8.3 billion, up 6.7% from a year ago.
  • Paid clicks increased 62% on Google properties.
  • Average cost per click (CPC) was down 28%.
  • Daily active users of Google Home devices have grown 5x in the past year.
  • Google Drive became the eighth Google product with more than 1 billion monthly active users.

Google continues to invest heavily in the business — both in terms of capital expenditures (machines, data centers — much of it supporting Cloud) and people. Capital expenditures totaled $5.28 billion for the quarter, up from $3.54 billion in Q3 last year. Employee count also grew substantially. There are now over 94,000 Googlers around the world, an increase of 21% from Q3 last year.

So about those milestones…

First, Google celebrated its 20th birthday in September. Coinciding with that milestone, it announced a number of upcoming improvements to Search and made the case that the mission of connecting users with answers is a timeless problem.

We will outline all those changes elsewhere, but a key takeaway for brands and retailers is the continued shift to a more visual search experience. We have seen this shift firsthand in the retail world as Product Listing Ads — and, more recently, Showcase Shopping Ads — have crowded out text ads. Google has announced that these ads will now feature video and also announced the launch of Shoppable Image ads. We think the goal here is to continue to make the search experience more immersive, intuitive and engaging for users.

Google Chrome also hit a milestone. It’s been 10 years since the browser launched, and its massive market share is a clear indication of the huge success it’s been for the company.

Google has been a significant part of the marketing mix for brands and retailers over the last 20 years. With all of the company’s investments in Search, along with the launch of Google Shopping Actions, it’s clear Google plans on remaining just as relevant for the next 20.

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