On Thursday, Alphabet reported its third-quarter earnings for 2017 as US$27.77 billion.
Despite a 1% increase in the cost per click on Google properties, compared to the third quarter of 2016, revenue rose to US$24 billion, up from US$19.8 billion at the same time last year. The data shows that despite the rise in cost for clicks, advertisers and agencies have not reduced spending on Google's products, an indicator for medium effectiveness.
At the start of 2017, P&G's chief brand officer, Marc Pritchard, called for marketers to vote with their dollars. The advertisers clearly listened and voted towards contributing a 24% year on year rise in revenue for Alphabet, the American multinational conglomerate created in 2015 as part of a corporate restructuring of Google and several subsidiaries.
The top three avenues driving profits are YouTube, mobile, and programmatic, accounting for 15 to 20% of advertising revenue growth. With over 1.5 billion users spending an hour a day on mobile, YouTube claims to be watched for more than 100 million hours every day. According to Sundar Pichai, the CEO of Google, ads on YouTube have a 95% viewability rate, while the industry standard is 66%, per his claim.
With over 40 original shows planned for the next quarter, YouTube Red represents Google's first attempt into the subscription market, adding on YouTube TV as a live subscription service.
Analysts that attended the earnings call showed concern for the rising traffic acquisition costs (TAC). The TAC refers to the amount Google pays publishers and digital property owners listed on the Google Network. It also includes distribution partners such as browser providers, mobile carriers, original equipment manufacturers, and software developers.
Pichai attributed this rise in cost to the changes in partner agreements and the switch to mobile-based traffic, the latter being preferred targets by advertisers. He also cited this as an indicator of strong growth for programmatic and mobile search.
Leading up to the third quarter of 2017, Google announced a string of product updates, innovations, and upgrades including
- Native programmatic within AdSense
- Voice-based search within Google Analytics
- Google Glass with an enterprise focus
- Call bid adjustment within Google Adwords
- Keyword data visualization within Google Adwords
The only operating loss in the earnings call came from Nest and Waymo, with both contributing to a net loss of US$812 million for Alphabet, referenced under operating loss for other bets.