Google Inc.’s paid clicks rose 23% year over year and 4% quarter over quarter the company said today in its Q2 2013 earnings which ended June 30. Average cost per click fell 6% year over year in Q2 and 4% quarter over quarter, it said.
Google did not disclose the number of clicks on its search engine results page ads, only the increase.
In the second quarter, the company’s consolidated revenue was $14.11 billion, up 15.6% from $12.21 billion in Q2 2012. Of that, its mobile phone maker subsidiary Motorola Mobility accounted for $998 million, or about 7% of consolidated revenues, it says.
Google’s net income in the first quarter was $3.23 billion, up 15.8% from $2.79 billion in the second quarter of 2012.
Revenue from mobile devices in June 2013 was three times what it was in June 2012, Nikesh Arora, senior vice president and chief business officer at Google, told analysts in an earnings call this afternoon. He did not disclose mobile revenue.
During the second quarter, Google rolled out several updates to users including a redesign of Gmail inboxes and an update to its Maps application. App developers can integrate Google Maps into their apps as an added feature via an application programming interface. The company has also been building up its hardware offerings, testing such devices as a wearable computer called Google Glass and self-driving cars, which have yet to hit the streets outside of testing.
“It’s always a mistake to assume technology will be static,” CEO Larry Page told analysts in the call. Long-term, he says Google will continue to develop not only new hardware, but new ways to interact with hardware. For example, developers are already creating apps for as-yet unreleased Google Glass.
For the second quarter, Google also reports:
• Google-owned sites, such as the Google.com search engine and YouTube, contributed $8.87 billion, or approximately 68% of revenue, excluding Motorola. That’s up 17.6% from $7.54 billion in the same period a year ago.
• A 7% year-over-year increase in Google network revenue to reach approximately $3.19 billion from $2.98 billion the same period a year earlier. This is revenue Google receives from clicks on ads it places on the web sites of other companies, including retailers’ sites.
• Google’s traffic acquisition costs—that is, the amount Google pays to web sites that host Google ads—increased to $3.01 billion in the second quarter, up 15.8% year over year from $2.60 billion.
• International revenue of $7.2 billion, up 21% compared to $5.96 billion a year earlier. 54.9% of total international revenue was non-Motorola revenue in the second quarter compared to 54.4% in Q2 2012.
Google’s results beat the estimates of some analysts, including Jeffries Equity Research, which said its analysis of the uptick in clicks on Product Listing Ads would generate a 16% year-over-year increase in paid clicks and a 1.8% year-over-year decrease in cost per click. The number of advertisers using Product Listing Ads in the United States in Q2 increased 54.7% quarter over quarter and the total number of such ads in the U.S. rose 20.8% quarter over quarter according to Jeffries’ research. Google only started charging last fall for those listings, which display an image and price as well as the retailer’s name prominently on search results pages.
The decrease in Google’s cost per click is most likely a result of the higher volume of mobile clicks, which cost advertisers less than desktop clicks, says Roger Barnette, president of digital marketing technology company IgnitionOne. That mobile volume increased with the recent introduction of what Google calls Enhanced Campaigns. With Enhanced Campaigns, instead of having to cobble together and compare several separate campaigns, reports and ad extensions, advertisers now can manage them all in one spot. Google announced the new paid search ads format in February and says it will be standard for all advertisers starting next Monday, July 22.
Three-quarters of all Google AdWords campaigns are already Enhanced Campaigns, according to research from Canaccord Genuity, the market analysis unit of investment banker Canaccord Financial Inc. For advertisers that have already migrated to Enhanced Campaigns, IgnitionOne has measured the same returns as with previous AdWords campaigns, but increased clicks and ad volumes, Barnette says.
“What is clear is that migration strategy had a huge impact on whether marketers saw steady or decreased performance,” he says. “Marketers who opted for a ‘default’ migration generally saw lower ROI but more traffic. But sophisticated marketers who were more careful about their bid adjustments during the migration saw small changes in impressions and clicks and a steady ROI post-migration.”
Another change with Enhanced Campaigns is that Google does not separate ads going to tablet devices from those going to desktops. Initially, that drove up competition among tablet and desktop advertisers, decreasing the return on investment for those clicks, Barnette says. However, the overall increase in mobile ads has driven the average cost per click down enough that the return from tablet ads is in line with that on other devices, he says. Before Google launched Enhanced Campaigns, tablet ads performed better than ads for other devices, he says.