Alphabet gains on Google’s record-breaking advertising machine

SAN FRANCISCO Google is still raking in marketing dollars from advertisers, propelling the online search giant to another strong quarter in the face of costly regulatory trouble in Europe. The shares jumped as much as 6.1 per cent in extended trading, putting them on course for a record.

Parent company Alphabet Inc. reported second-quarter sales, minus partner payouts, of US$26.24 billion. Analysts were expecting revenue of US$25.55 billion, according to data compiled by Bloomberg. Google’s advertising business grew 24 per cent. Chief Financial Officer Ruth Porat said most of that came from mobile and automated ads.

Google has continued to give search ads more prominent space on mobile phones, helping to fuel the brisk sales growth. Spending on Google Shopping search ads, which let marketers promote consumer products, increased 31 per cent in the second quarter from a year earlier, according to data from digital marketing firm Merkle. Those gains came even as Amazon.com Inc. revs up its own ads business.

Alphabet reported two different profit figures to account for a US$5 billion fine the European Union imposed last week for violating competition law with Google’s Android mobile software. Excluding that, Alphabet said profit was US$11.75 a share. Google plans to contest the ruling. Even including the record fine, the company generated US$3.2 billion in net income during the second quarter.

Google also shrugged off the General Data Protection Regulation, a European privacy law that started in May and limits targeted advertising. Similarly, analysts don’t expect EU antitrust probes to force changes that significantly dent Google earnings. “The Android fine may suggest that peak regulatory risk is now in the rear view mirror,” Mark Mahaney of RBC Capital Markets wrote in a note before Monday’s results.

A larger share of Google’s ad dollars went to its own digital properties, including the search engine and video service YouTube, rather than outside websites that run its ads. Google properties revenue jumped 26 per cent to US$23.3 billion. That leap reflects a recent push by Google to get marketers buying across more of its advertising channels.

“They’re using the packaged deal, with all their properties, with a much stronger sell,” said Marco Rimini, chief development officer at WPP Plc’s Mindshare media agency.