Google Q4 2018 Earnings: Continued Growth Fueling Heavy Investments
Other than early-stage ventures with loads of venture capital, most businesses lack the ability to significantly invest not just in the near future, but in the long term as well.
Today’s tech giants are the exception to that rule. Google demonstrated that this week, reporting significant investments in both R&D (think: engineers) and capital expenditures (think: data centers, offices and servers) combined with continued, steady revenue growth. That growth continues to come from mobile advertising along with YouTube and desktop search.
Highlights from the quarter include:
- Revenue increased 22% for the quarter (23% on a constant currency basis) and was $39.3 billion.
- Other revenues were up 31%, which includes Cloud, Play and hardware (Home, Pixel, etc.) and were $6.5 billion.
- Operating income was $8.2 billion, up 7% from a year ago.
- Hiring continued and has likely eclipsed 100,000 employees.
- Paid clicks increased 66% on Google properties.
- Average cost per click (CPC) was down 29%.
- Daily active users of Google Home devices quadrupled over the past year (down from last quarter when they were up 5x).
For the full year, Google reported:
- Revenue of $136.8 billion, an increase of 23%
- Operating income of $26.3 billion, an increase of .6%
While much is made of the statistics indicating that many consumers start their search on Amazon when shopping, it’s clear that Google remains a significant shopping destination. On the earnings call, Sundar Pichai, Google’s CEO, disclosed that the number of daily active shoppers on Google.com during the holidays doubled compared to last year.
Answering a question about Shopping Actions, Pichai said: “We see users come to Google a lot around key shopping moments. And we want to make sure we invest in that experience to get closer to what they want.”
Another metric illustrating this point is the increase in paid clicks (66%) during Q4 last year — the fastest growth rate in over 4 years. We see Google driving more clicks — particularly in Shopping — as it experiments with new shopping formats (such as Showcase Shopping and Shoppable Image ads), as well as expanded carousels of Product Listing Ads that routinely contain dozens of products.
Much of Google’s investment in engineering has been spent on Machine Learning and various other advanced technologies. This point was called out in their results as “improving the ability to match consumer intent for better ROI.” We have certainly seen this at ChannelAdvisor with tools such as Enhanced CPC (ECPC) providing a better signal of intent, which contributes to improved results for advertisers. We fully expect this to be an area of continued investment for Google and believe that the tools will become even more widespread and tailored for specific situations.
The better Google can determine a consumer’s intent around key shopping moments, the better a retailer can advertise to the consumer, and the more Google gets a return on its investment. You might call that a win-win-win situation.