YouTube, mobile lift Alphabet’s results
Q3 net income rises 27% from a year ago to $5.06 billion
Google’s clicking with mobile device users, lifting the fortunes of parent company Alphabet.
Strength in advertising on mobile devices and videos fueled yet another solid quarter for Alphabet that topped Wall Street estimates.
Alphabet said Thursday that third-quarter net income rose 27% to $5.06 billion, or $7.25 a share, from a year ago. Excluding certain expenses, Alphabet said it would have earned $9.06 a share, beating analyst estimates of $8.60 a share. Alphabet revenue rose 20% to $22.45 billion. Excluding payments to advertising partners, total revenue was $18.27 billion. Analysts expected revenue of $17.99 billion.
“Revenue growth continues to accelerate, 20% growth and 23% with neutral currency, those are really significant growth rates,” CFRA analyst Scott Kessler said. “It underscores the continuing vibrancy of the company’s offerings and business model.”
Google’s ad revenue rose 18.1% to $19.82 billion in the third quarter, accounting for 89.1% of Google’s total revenue.
As people spend more time on smartphones, they are clicking on more Google ads. Advertisers generally pay less to reach consumers on mobile devices than desktop computers.
Paid clicks, when users click on an advertisement, rose 33%, compared with an increase of 29% in the second quarter. Cost-per- click, the average amount advertisers pay Google for each click, fell 11% in the latest period after dropping 7% in the second quarter.
“Paid clicks are notably higher than folks expected, and the decline in cost-per-click was rough- ly in line with what people anticipated,” Kessler said.
Online video has emerged as another key driver of advertising growth with YouTube playing a starring role for Google, Ruth Porat, chief financial officer of Alphabet, told analysts. “YouTube revenue continues to grow at a very significant rate,” she said.
Pivotal Research Group analyst Brian Wieser says YouTube is not only making progress in capturing share of online video, it’s making “an increasingly plausible case for capturing traditional television budgets.” Google, Facebook and other tech companies are eager to crack open that big pot of dollars that marketers spend on television.
“This was illustrated by this year’s announcement that clients of Interpublic’s Magna Global would commit $250 million of TV ad spending to YouTube,” Wieser said.
Digital is forecast to overtake TV ad spending this year for the first time. By the end of this year, U.S. digital ad spending will reach $72.09 billion, while TV spending will grow to $71.29 billion, according to research firm eMarketer.