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Google Profits Drop $2.7B on the Back of EU Fine, While Brand Safety Has Zero Impact
Ali Farhat , Editor | Jul 26, 2017
Topic category: Fools & Phishing
The Trust Web
Chris Ratcliffe/Bloomberg

Google might be safe for now, but the company's unethical practices will catch up to it. ––Ali Farhat, Editor, TTW

Alphabet-owned Google saw its advertising revenue surge once again thanks in large part to its stranglehold on search advertising, YouTube and its digital ad business, the company said Monday during its second quarter earnings call.

Overall, Google saw revenue of $26 billion for the quarter ending June 30, a 21% uptick from the same time last year.

Although revenue was up, Google's stock was down in after-hours trading to roughly $968. Not because of brand safety issues, but because of a massive fine levied by the European Commission.

Despite the uproar and posturing from major brands regarding Google ability to protect brand ads from appearing next to ISIS videos, the company remained unscathed financially: Ad revenue generated $22.7 billion during the second quarter, up from $19.1 billion when compared to the previous year, Google said.

The numbers indicate that cuts made from major marketers that include Walmart, AT&T and others did little to hurt the tech titan.

Net income, meanwhile, came in at $3.5 billion in the second quarter, down 27% from $4.8 billion year-over-year. The dip was a result of a massive $2.7 billion fine from the European Commission. Google immediately addressed the 800-pound gorilla lurking on the call, adding that had the fine not been levied, net income would have totaled about $6.3 billion -- not $4.5 billion.

Google was found to have breached EU antitrust rules for its practices around its Shopping section, a key growth driver for the search giant. "Product Listing Ads is a product that has come under fire recently by U.K. commision about how they are displaying results," Mark Ballard, VP of research at Merkle, said.

Ballard reckons roughly 10% to 15% of Google's ad revenue comes from PLAs. Google Shopping and Product Listing Ads accounted for 53% of search ad clicks among retailers in Q2, up 31% year-over-year, according to Ballard. Text search ads, meanwhile, generated only 16%.

Although cost-per-click was down 23% year-over-year, paid clicks were up in a major way: 52% when compared to the same time last year. Creating new ad products for marketers is critical for Google's continued growth.

YouTube
Google says it now has 1.5 billion monthly users on YouTube who are consuming about 60 minutes of content each day. CEO Sundar Pichai said "the fastest growing screen for YouTube is in the living room."

The company reported a 22% upswing, or $5.1 billion, in traffic acquisition costs and added that YouTube original programming played a large role in the increase. Stars like Kevin Hart and Ellen Degeneres are making content for the show.

The six-second bumper ad format for YouTube has found success with brands like Microsoft and L'Oréal, Pichai claimed. The company did not share specific or further insights Monday, but added its YouTube Live TV feature has tripled the amount of markets it is currently being offered.

Store visits
The company is getting better at connecting consumers and the ads they viewed online to the stores they later visit. The company said Monday it has tracked 5 billion store visits to date.

It also has partnered with major retailers and credit card companies to link purchases made by consumers to the ads they've seen online. Google's partnerships have captured information from approximately 70% of all credit card transactions in the U.S.

"Our store-visits technology is instrumental in understanding consumer behavior," Pichai said on the call Monday. "Our store measurement is one of its kind."

Search Advertising
Google has a monopoly on the search advertising market. Merkle claims it controls 97% of all mobile ad clicks and 87% of desktop. Meanwhile, eMarketer claims Google has an 88% search market share.

Whichever way you cut it, the number of clicks made was up 52% despite marketers paying less for each click.

Google said it plans to play the long game when it comes to generating revenue off image search, maps and voice search.

SOURCE:
George Slefo |Jul 24, 2017
FROM: AdAge
Tags: Google, Digital Trust, Ad Tech
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