Google’s Ad Dollars Keep Rising Thanks to Smart and Stealthy Moves

Shopping ads and text formats drive revenue

Advertiser spending was up about 20 percent at Google last quarter, and market experts said some of the company's strongest initiatives such as enhanced campaigns and shopping ads are helping—even if they may fly under the radar to many observers. The Mountain View, Calif.-based digital giant announced quarterly results this week, and its stock rose along with revenue.

Adobe, which oversees about $2 billion in marketing dollars that flow through Google, also reported this week that clickthrough rates on Google ads were up 20 percent in the United States.

"We believe this shift is the result of Google changing its text ad formats for search queries (denoted by a subtle yellow 'Ad' icon opposed to being explicitly highlighted as ad or sponsored result)," Adobe said.

Adobe's numbers were in line with what Google reported for the second quarter when it said paid clicks were up 25 percent. However, cost-per-click was down 6 percent year over year, partly because of mobile advertising’s lower prices.

Google has made the following moves this year to attract more brand dollars and squeeze more out of its search business:

  • Further developed YouTube and its digital video ad offerings;
  • Gone after the likes of Amazon with product listing shopping ads;
  • Grown its multimedia-based Play store;
  • Introduced an enhanced campaigns feature—which lets advertisers manage across desktop, tablets and phones in one place—and repositioned AdWords for a multidevice world.

During the quarterly call with analysts this week, Google executives discussed areas for growth, including the Google Play digital store, YouTube, and shopping and app advertising. Last quarter, it launched a premium video marketplace called Google Partner Select.

At this year's Cannes Lions International Festival of Creativity, Google met with 300 brands and agencies, including Digitas, Omnicom, General Motors, Coca-Cola and Universal Studios, the company said.

"Today's brands are putting digital at the center of brand campaigns," said CFO Patrick Pichette, also mentioning YouTube channels like Epic Rap Battles and Vice News as examples of its push into premium online video.

Here's a look at key numbers for Google going forward:

  • Google's overall revenue was $16 billion last quarter, a 22 percent jump year over year, with profits of $3.42 billion.
  • Google's product listing ads for shopping drove three times more traffic to retail sites than they did a year ago, according to SunTrust Robinson Humphrey analysts.
  • Revenue from the mobile app, Play store and other digital products was up 53 percent last quarter compared to a year ago.
  • As for mobile, 30 percent of search spending falls under that category, and by the end of the year it will be up to 35 percent, according to Adobe.
  • Google's share of the overall mobile market is shrinking, however, as Facebook and Twitter continue to rise. Google controlled 41.5 percent of all U.S. mobile ad spend last year, down from 50 percent the year before, according to eMarketer.
  • Google's stock was up almost 4 percent after its earnings release, despite the fact that profits were less than expected. Revenue beat analyst forecasts, however.

Also this week, Google's chief business officer Nikesh Arora said he was leaving the company for Japan's SoftBank. Longtime Googler Omid Kordestani is taking his place. 

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