San Francisco - After struggling for years to wring
profit from the mobile boom, Google is benefiting from a surge in clicks on ads
on smartphones.
Capitalising on consumers’ shift toward handsets and away
from laptops, Google crammed more ads into mobile search results, including new
lucrative shopping spots, while running more promotions on its Maps app. The
result: Parent Alphabet Inc. beat analysts’ sales projections in the first
quarter, ending a four-year streak of missing Wall Street estimates after the
holidays.
Revenue in the most-recent quarter, minus payouts to
partners, rose to $20.12 billion, above projections of $19.76 billion. Net
income was $7.73 a share, easily beating analysts’ estimates, helped by cost
controls at some of the company’s moonshot projects.
Company shares rose as much as 5.2 percent to $938.18 in
extended trading. The stock closed at a record earlier on Thursday in New York.
Along with mobile ads, Alphabet executives cited the
growth of YouTube ads as a key driver. Major marketers paused spending recently
on the video site over concern about ads running beside offensive content, but
this probably had little effect on first-quarter results because it began less
than two weeks before the period ended. And the boycott didn’t include search
ads, the bulk of Google’s business.
Google CEO Sundar Pichai said the company will continued
to invest in technological fixes for the YouTube issue, but assured investors
the problem was under control. "Advertisers have clearly noticed all the
improvements we have made," he said on a conference call with analysts.
"Our conversations with them are very, very positive."
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Analysts were reassured by Pichai’s comments and the
company’s results. "Bottom line, fears over demand drop-off from YouTube [were]
alleviated," said James Cakmak, an analyst at Monness Crespi Hardt &
Co.
Another factor that investors may cheer came from
continued cost controls at Alphabet’s most audacious projects. The company cut
spending on its Other Bets units -- the non-Google businesses that include its
self-driving car company, Waymo. Expenditures on those divisions totaled $170
million during the quarter, down 39 percent from a year earlier. Alphabet spent
more than 14 times that amount on Google.
Other Bets operating losses narrowed from the prior
quarter, mainly from a pullback by the company’s Fibre broadband service. Last
year, it dramatically cut back on the once-ambitious effort. On the earnings
call, CFO Ruth Porat said some Fibre staff were reallocated to Google.
In a letter to shareholders before Alphabet’s earnings, CEO
Larry Page highlighted the recent progress of the self-driving car business,
saying he "can’t wait until Waymo launches." Page also noted
"significant investments" to expand Fiber and expressed excitement
about "opportunities to do it better" -- a nod to the efficiency
drive at the broadband business.