Google's Q1 ad sales surge 32% on rising consumer activity

NEW YORK • Google's results, showing a surge in ad sales related to travel and retail, offered a glimpse of online spending in a post-pandemic world: Businesses are boosting digital marketing to capture a public eager to resume something resembling normal life again.

Google's ad sales surged 32 per cent to nearly US$45 billion (S$59.7 billion) in the first quarter compared with a year ago, above expectations of analysts tracked by Refinitiv.

It is the third consecutive quarter of accelerating ad growth for Google. During last year's April-to-June period, ad sales dropped 8 per cent, the first time that quarterly ad revenue had fallen from the previous year since the search company went public in 2004.

Google parent Alphabet said first-quarter revenue, excluding payments to distribution partners, came in at US$45.6 billion, pummelling Wall Street estimates.

Google's ad business, the global market leader as measured in sales, accounted for 81 per cent of the quarterly revenue.

Overall, Alphabet generated US$17.9 billion of net income, or US$26.29 a share, in the most recent quarter, more than double the US$6.8 billion, or US$9.87 a share, a year earlier.

The company also unveiled a big new share buyback, sending the stock up more than 4 per cent in extended trading.

Covid-19 restrictions have limited travel and trips to physical stores, two key areas of Google's search business. However, Alphabet shares are up more than 30 per cent this year on optimism that vaccinations in the United States are reviving these activities.

The company is also pushing further into e-commerce, but still lags behind rival Amazon.com

While most major tech companies thrived during the pandemic, Alphabet's performance was uneven. YouTube ad revenue boomed as people were stuck at home watching videos online. Google's cloud-computing business also grew quickly on a spike in demand for Internet-based services from remote workers.

However, the online search engine dwarfs these other operations and it suffered from a slump in commercial queries for things such as flights and hotels.

Now, with more than one billion Covid-19 vaccine shots given out, according to Bloomberg's vaccine tracker, consumers have started to venture out to restaurants, shops and even vacation destinations - and they often interact with Google services and ads before they do.

Alphabet's chief financial officer Ruth Porat said the results "reflect elevated consumer activity online and broad-based growth in advertiser revenue".

During a conference call with analysts, Ms Porat said it is unclear how "durable" the recent change in consumer behaviour will be, because it will depend on the global pace of the Covid-19 recovery.

The Alphabet board authorised the company to repurchase up to an additional US$50 billion of its Class C capital stock.

Chief executive Sundar Pichai is trying to expand beyond the advertising engine that generates most of Alphabet's revenue, while contending with a regulatory backlash that includes three government antitrust suits targeting different parts of its business in the US. He is also preparing to bring employees back to the office in September.

Search and other related businesses generated sales of US$31.9 billion in the first quarter. Wall Street estimated US$29.9 billion.

YouTube ad revenue surged 49 per cent to US$6 billion. Analysts were looking for US$5.7 billion.

YouTube Shorts, its competitor to TikTok, logged 6.5 billion daily views as at last month, up from 3.5 billion at the end of last year.

Google Cloud revenue jumped to US$4 billion, in line with Wall Street expectations.

Alphabet's Other Bets, which includes autonomous vehicles and delivery drones, generated revenue of US$198 million. That division lost US$1.15 billion.

BLOOMBERG, REUTERS