Google profits surge with advertising boom

Google has aggressively shifted the focus of its business to mobile advertising.
Google has aggressively shifted the focus of its business to mobile advertising. PHOTO: AFP

Dominance in digital advertising follows shift in business focus

SAN FRANCISCO • Google parent Alphabet posted a surge in profit and revenue on Thursday, as its core advertising business continued to grow at an extraordinary rate and problems such as an advertiser boycott of YouTube had little impact.

Alphabet's profit beat Wall Street estimates and rose 29 per cent to US$5.43 billion (S$7.58 billion), a performance that analysts called exceptional for a company so large.

"For a company of Google's size to post the growth that it has is just a testament to the quality and usefulness of the products they make," said BGC Partners analyst Colin Gillis. "They are the dominant force in digital advertising."

Like its archrival Facebook, Google has aggressively shifted the focus of its business to mobile advertising. The two companies accounted for 99 per cent of the industry growth in digital advertising last year, Pivotal Research said in a report this week, demonstrating market power that some advertisers complain amounts to a duopoly.

"It underscores a macro theme we are seeing in the Internet space, which is that the bigger players are getting bigger and the smaller players are treading water or shrinking," said analyst James Wang of ARK Investment Management.

Google is expected to command a 61.6 per cent share of the search ad market worldwide this year, up from 60.6 per cent last year, according to research firm eMarketer.

Mobile ads command lower prices than desktop ads, but growing volume is more than making up for the difference, Mr Wang said.

Google chief executive officer Sundar Pichai said during a call with analysts: "Our great properties - like Search, Maps, YouTube and Google Play - are the 'prime time' for the mobile world, where people are actively engaged and interested."

Google's revenue rose 22.2 per cent to US$24.75 billion in the quarter ended March 31. Paid clicks, where an advertiser pays only if a user clicks on ads, rose 44 per cent. Analysts on average had expected a rise of 29.7 per cent, according to FactSet StreetAccount.

Net income rose to US$5.43 billion, or US$7.73 per share, from US$4.21 billion, or US$6.02 per share, a year earlier.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 29, 2017, with the headline 'Google profits surge with advertising boom'. Print Edition | Subscribe