Google’s advertising business rose 15.3% in the first quarter ended March 31 compared to the previous year, the search engine’s parent company Alphabet Inc. announced Monday. That was a significant slowdown from 19.9% growth in the fourth quarter and 24.4% in the first quarter of 2018.
As the company looks ahead, it is focused on leveraging machine learning to help it attract ad dollars, said Sundar Pichai, Google’s CEO, during a conference call with analysts. Machine learning has made the ad buying process “much easier for advertisers of all sizes,” he said. “I think it’s a natural extension for us to continue working in that direction, and that will help us reach [small and midsized businesses] and local advertisers better over time.”
He pointed to automated bidding tools such as smart shopping campaigns, which enables a retailer to upload its product feed and assets to Google, set a budget and target market. The system the pulls items from the retailer’s product feed and tests different image and text combinations to create ads that appear Google networks, including the Google Search Network, the Google Display Network, YouTube and Gmail. More than 20,000 merchants are using the tool, he said.
One crucial ingredient to Google’s long-term success is its dominate search—and mobile search in particular. Google accounted for 96% of all mobile organic search-driven visits during the quarter, according to digital marketing firm Merkle’s “Digital Marketing Report Q1 2019,” which it released last week.
The search giant says the number of impressions across Google-owned properties and its ad network increased 6%, and the cost per impression on those properties ticked up 1%. The average cost per click on a Google ad on Google-owned properties fell 19% compared with the same period a year earlier.
One small, but growing area for Google is its Showcase Shopping ad format, which look similar to Product Listing Ads but take a consumer to a Google-hosted store page. According to the Merkle report, those ads accounted for 8.0% of phone Shopping ad clicks during the quarter, up from 5.7% from the previous quarter and from 3.0% during the same time a year earlier.
In addition to driving organic traffic to retailers’ websites, Google also drives a large share of consumers to click on paid search ads. Google reported that paid clicks on ads on Google-owned properties, such as its search engine, Google Maps and YouTube, soared 39% compared with the same period a year ago.
For the first quarter ended March 31, Alphabet reported:
- Advertising revenue of $30.720 billion, up 15.3% from $26.642 billion a year earlier.
- Google-owned sites, such as its search engine and YouTube, generated $25.682 billion in revenue, up 16.7% from $21.998 billion.
- Net income of $6.657 billion, up from a $9.401 billion. The revenue decline stemmed from a 1.49 billion euros ($1.7 billion) from the European Commission for thwarting advertising rivals.
- Google’s traffic acquisition costs, which is what Google pays to websites that host Google ads, rose to $6.860 billion, up 9.1% from $6.288 billion