Google’s strong growth was helped by growing competition among retailers and other advertisers buying Product Listing Ads.

Google’s advertising revenue grew more than 21%  in the third quarter, roughly a three percentage point acceleration from 18% growth in the second quarter, the company’s parent company, Alphabet Inc. reported today.

Ads across Google-owned properties and its ad network are key drivers behind that growth. Paid clicks across Google’s sites and advertising network rose 47% in the third quarter compared with the same period a year ago.

On Google’s search engine, YouTube and other Google-owned sites, the number of paid clicks rose 55% year over year.

The average cost per click on a Google ad across all formats and venues fell 18% compared with the same period a year earlier. On Google sites alone, the cost per click fell 21% year over year, while the cost per click on Google Network Members’ websites decreased 5%.

Google’s strong growth was helped by growing competition amid retailers and other advertisers buying Product Listing Ads, according to a new report released this week by digital marketing agency Merkle RKG. PLA spending grew 47% during the quarter and Google text ad spending jumped 15%, the report found. And the cost per click for Google ads rose 4%, a four percentage point increase from the previous quarter when CPCs were flat. PLAs accounted for 53% of Google search ad clicks among U.S. advertisers, up from 48% a year earlier, and the same percentage as the second quarter

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Key to the company’s success is its push to innovate, said Ruth Porat, the company’s chief financial officer, during a conference call with analysts. “We’re running a lot of experiments to enhance user and advertiser experience,” she said. “And the approach continues to be productive, especially because the line of inquiry evolves as user behavior evolves. And so what users wanted in the earlier days of smartphones when screens were smaller is obviously, very different from expectations users have today. Each quarter, the ads team introduces more than 100 enhancements out of a much larger pool of assumptions that they’ve tested. Machine learning is at the center of our processes and systems. And we do remain excited about the potential.”

E-commerce is a huge opportunity for the company, said Sundar Pichai, Google’s CEO. “As a vertical, we see huge opportunities there,” he said. “There’s a lot of flywheel effects we see. Almost all e-commerce providers are really interested in, like, cloud for obvious reasons. So we see tremendous traction by which we are – we can talk to them about cloud. They’re already advertising partners. They’re beginning to work with us much more closely on driving a seamless shopping experience. We’re working on payments. And so, it creates a nice flywheel effect, and we can do this globally across all the countries we do it in. And so, we are treating it more thoughtfully and investing in addressing the vertical opportunity we see in front of us, and we’ll continue working on that.”

For the third quarter ended Sept. 30, Alphabet reported:

  • Advertising revenue of $24.065 billion, up 21.4% from $19.821 billion a year earlier.
  • Google-owned sites, such as its search engine and YouTube, generated $19.723 billion in revenue, up 22.6% from $16.089 billion.
  • Net income of $6.732 billion,up 33.0% from $5.061 billion.
  • Google’s traffic acquisition costs, which is what Google pays to websites that host Google ads, rose to $5.502 billion, up 31.6% from $4.182 billion.

For the first three quarter of the year, Alphabet reported:

  • Advertising revenue of $68.148 billion, up 26.2% from $53.984 billion a year earlier.
  • Google-owned sites, such as its search engine and YouTube, generated $55.551 billion in revenue, up 21.2% from $45.817 billion.
  • Net income of $15.502 billion, up 9.6% from $14.145 billion.
  • Google’s traffic acquisition costs, which is what Google pays to websites that host Google ads, rose to $15.220 billion, up 27.4% from $11.945 billion.
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