Alphabet revenue tops estimates as Google ad sales jump 16%

Brief:

• Google parent company Alphabet reported $32.6 billion in ad revenue in Q2 2019, a 16% year-over-year gain, per an announcement. The results marked a slight reversal in a four-quarter decline that saw its yearly ad growth rate plunge from 24% in Q1 2018 to 15% in Q1 2019.
• Analysts expect the search giant to expand ad sales in its Maps app and on YouTube, although Google remains tight-lipped about results for the popular video-sharing platform. Overall sales rose 19% to $38.9 billion, beating estimates of $38.1 billion, as “other revenue” from businesses such as cloud computing and consumer hardware expanded 40% to $6.18 billion. The cloud business is on track for $8 billion in revenue this year, CEO Sundar Pichai said in a call with analysts.
• Google’s profit almost tripled to $9.9 billion from last year, when the European Commission required the company to deposit a $5.1 billion fine in a holding account. Authorities penalized Google for allegedly abusing its power in the mobile phone market, a decision that Google appealed. A final verdict could take years to reach.

Insight:

Google’s Q2 ad revenue growth of 16% was slower than Facebook’s 28% and Amazon’s 37%, but was welcomed by analysts that had been disappointed by the search giant‘s Q1 performance. The results indicate that Google’s core business remains resilient, including its estimated 96% market share for mobile search. The company also reported traffic acquisition costs — payments made to companies like Apple to make Google the default search engine in web browsers — of $7.24 billion, beating estimates of $7.27 billion.

The tech giant in the past few months has worked to expand its range of ad formats while pushing into other businesses such as e-commerce. Last month, it began testing a carousel format for its mobile, text-based search ads as the search giant seeks to expand its ad inventory on the mobile web while avoiding user disruptions. In May, the company launched a revamped Google Shopping experience to provide new ways for users to find and compare millions of products from thousands of stores and buy them online, in a nearby store or directly through Google. Google Shopping ads that show images of products that people search for surged more than 40% during Q1 of 2019 as compared to a year earlier, according to Merkle data.

Unlike Facebook, Alphabet’s quarterly report didn’t acknowledge growing antitrust scrutiny from the U.S. Justice Department and the Federal Trade Commission. Alphabet, Amazon, Apple and Facebook are among the Silicon Valley giants that are being scrutinized for possibly stifling competition in apps, e-commerce and digital advertising. Google is expected to pay a settlement with the FTC over allegations that YouTube violated laws governing the use of children’s data, The Washington Post reported last week.