Mobile search, YouTube pump up Google earnings

Google shares soared on Thursday after the Internet titan beat second quarter earnings expectations by riding hot growth of mobile search and advertising on YouTube.

Time spent watching YouTube videos on smartphones or tablets has surged as part of a 60% jump in overall viewer time spent on the website, Google said. Photo: AFP

Google shares soared on Thursday after the Internet titan beat second quarter earnings expectations by riding hot growth of mobile search and advertising on YouTube.

The Silicon Valley-based company said that second-quarter net income climbed two percent to $3.4 billion on an 11 percent rise in revenue to $17.7 billion.

Google's shares soared more than 10% in after-hours trade to nearly $642 after marking a 3.5% gain during the regular session prior to the earnings release.

'We continue to close the gap between mobile and desktop search monetization,' Google's new chief financial officer Ruth Porat said during her first earnings call at the company.

She credited work done to improve user experiences on mobile devices along with the quality of ads, as well as finding ways to merge online activities with real-world commerce.

Porat said desktop search-based advertising also posted solid revenue growth.

And Google's streaming video website YouTube saw substantial growth in viewer engagement during the past year, attracting marketers to its advertising platform.

'Internet Age' television

Time spent watching YouTube videos on smartphones or tablets has surged as part of a 60% jump in overall viewer time spent on the website, Google said.

Growth in 'watch time' continues to accelerate, according to Porat.

She contended that there was tremendous potential in the fact that YouTube has more than one billion users and that the number of people in the 18-49 age group who watch YouTube videos on mobile devices was greater than the number watching cable television.

YouTube is focused on 're-inventing the television experience for the Internet age,' Google chief business officer Omid Kordestani said.

Google expects to boost its earnings in the future by attaching 'buy buttons' to mobile ads to make shopping easier for smartphone users.

The introduction of 'Purchases on Google' came as Facebook and Pinterest also try to make shopping seamless for people using their sites, putting themselves in position to profit from transactions or related advertising.

'Although we're still in early experiments with a limited number of retailers, we see 'Purchases on Google' as a big step towards helping retailers drive more mobile conversions and win more customers,' Google shopping product management vice president Jonathan Alferness said in a blog post.

Mobile devices, typically smartphones, are increasingly consulted before or during shopping trips in the United States, influencing nearly a trillion dollars in in-store sales last year, according to Alferness.

Revenue engine purr

Google took in a 31.42% share of money spent on digital ads worldwide last year, with that portion only expected to slip marginally this year as leading social network Facebook gains ground, according to industry tracker eMarketer.

The amount of money spent on digital advertising globally will increase more than 16% to approximately $170.85 billion this year, eMarketer predicted.

Google continues to dominate when it comes to online search-related advertising, with its share of the market this year expected to be 54.5 percent, according to the industry tracker.

Google shares may have benefitted from improved discipline when it came to costs associated with operating the company, said independent analyst Rob Enderle of Enderle Group in Silicon Valley.

'A lot of folks thought Google was losing track and control of expenses, and this financial report would indicate this is not the case,' Enderle said.

'It also showcases how powerful the Google revenue engine is.'