Google advertising revenue climbs 41% as growth exceeds expectations

Google exceeded investor expectations as it reported a 41% revenue rise in the third quarter, driven by significant growth from its advertising business.

Total revenue hit US$65b, up from US$46b in the same quarter last year.

Google search advertising contributed almost US$38b, up 44%, while YouTube advertising climbed 43% to US$7.2b.

Revenue generated from Google Cloud increased 44% to US$4.9b.

Profit in the three months to September hit US$18.9b, up from US$11.2b.

Speaking to investors this morning, chief business officer Philipp Schindler said retail was “by far” the largest contributor to year-over-year advertising growth with media, entertainment, finance and travel also strong performers.

But he said more advertisers were now adopting an omnichannel strategy rather than focusing purely online.

“We have seen explosive growth in digital over the past 27 months but as the world begins to reopen shoppers are returning to stores,” he said. “Bricks and mortar isn’t dead. Instead, omnichannel is in full force.

He said searches for ‘open now near me’ have climbed four-fold, with more people researching their visit to physical locations.

“As a result we are seeing more advertisers include in-store sales alongside e-commerce goals to achieve omnichannel growth.”

However, Schindler said the march towards digital was “real and will continue” even as shops do reopen.

“Shopping habits have ebbed and flowed….but the underlying take away is that people want more choice, more information and more flexibility and we don’t see that reversing,” he said.

Despite soaring revenue growth Schindler said there remains “a lot of unevenness” in the recovery from COVID.

While some economies have restarted, others have been slower to rebound, he said.

“It’s clear that uncertainty is the new normal,” he told investors.

He said the world remained “in flux”.

“When it comes to anticipating changes, predicting demand and investing in innovation, businesses need as much support now as they did a year and a half ago. And we continue to help,” he said.

Citing travel as an example, Schindler said new ad formats were making it easier for brands to promote local experiences, with consumers able to book tickets directly on Google.

“Business of all kinds are also increasingly adopting tools like AI driven automation and insights to connect with consumers no matter what stage of the recovery they are in,” he said.

Meanwhile, Google said it was managing through privacy changes Apple made to iOS 14 earlier this year which allows consumers to opt out of targeted ads on apps.

The search giant, which owns the Android operating system, said the privacy changes had a “modest impact on YouTube revenues.”

Alphabet and Google chief executive Sundar Pichai said of the results: “Five years ago, I laid out our vision to become an AI-first company. This quarter’s results show how our investments are enabling us to build more helpful products for people and our partners.

“Ongoing improvements to Search, and the new Pixel 6, are great examples. And as the digital transformation and shift to hybrid work continue, our Cloud services are helping organizations collaborate and stay secure.”

Chief financial officer Ruth Porat added: “Our consistent investments to support long-term growth are reflected in strong financial performance.

“We continued to deliver across our business by providing helpful and valuable experiences for both consumers and our partners.”


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