Google’s parent company, Alphabet, has beaten Wall Street expectations with its Q2 financial results, largely driven by its increasing investment in mobile advertising beginning to pay off.
While Google has always had a strong presence on mobile thanks to its Android operating system, its revenues have traditionally come from desktop search traffic, with advertisers paying lower rates for mobile ads.
However, as mobile browsing overtakes desktop, that trend is beginning to reverse, and Google’s efforts to establish a strong mobile search ecosystem are paying off.
Revenues grew 21.3 per cent year on year, up to $21.5bn (£16.2bn), with earnings for the quarter up 24.2 per cent on last year to $4.88bn. Ad revenues made up 89 per cent of all revenues, with other minor sources including the company’s cloud computing business.
Video was another big driver for the firm’s successful quarter, with CEO Sundar Pichai singling it out during the earnings call as a format where advertisers are willing to pay premium prices for users’ attention. Google is using artificial intelligence to drive video recommendations on YouTube, boosting consumer engagement and time spent on the platform.
Alphabet’s Other Bets business, which includes Nest, Google Fiber, self-driving cars and its ‘moon shoot’ division Google X, saw revenues increase by 150 per cent to $185m, but is still operating at a considerable loss of $859m.
Ruth Porat, chief financial officer of Alphabet, suggested that the Other Bets business may come under closer financial scrutiny in the future.
“I’ve commented many times that our focus on long-term revenue growth does not give us a pass on managing expenses,” Porat told investors during the earnings call. She has been credited with bringing greater financial discipline to the company overall.
Alphabet’s shares rose 6.5 per cent in after-hours trading in response to the financial results.