Google hails Google Play and 'phenomenal' YouTube ad growth

Android apps, big brands and Epic Rap Battles of History all featured in internet giant's latest financial results Google's second quarter financial results revealed further growth for the internet giant, as its revenues rose 22% year-on-year to $15.96bn. The company's net profits were up 5.9% to $3.42bn.


Google's own sites accounted for $10.94bn of its revenues in the last quarter, with advertising on other sites generating $3.42bn. The company also highlighted the growth of its Google Play store for apps, music, video and ebooks.


The "other revenues" category in Google's financial results was up 53% year-on-year to $1.6bn, with chief financial officer Patrick Pichette telling analysts that "digital sales of apps and content in our Play Store drove the year-over-year growth" for that part of Google's business.


His colleague, chief business officer Nikesh Arora – who is about to leave Google for a new job at SoftBank – added that "Google Play continues to grow at breakneck speed across all types of digital content".


He also pointed to the announcement during the recent I/O developer conference that Google had paid out more than $5bn to Android app developers in the last year alone. "Clearly, it is a growing business for us as well."


Another point of interest from Google's financials was the company's growth in the UK, where revenues jumped 22% year-on-year to $1.6bn, compared to 12% growth in the US to $6.6bn. The fastest growth came from the rest of the world, though, where Google's revenues rose 31% to $7.7bn for the second quarter.


YouTube was prominent during Google's earnings call with analysts, although Pichette declined to comment on a recent claim by technology site The Information that the online video service made $3.5bn in 2013. "We don’t comment on outside estimates," he said, although Arora was keen to talk up YouTube's growing business attracting advertising from big brands.


"Whereas digital used to be just one channel, today’s brands are putting digital at the centre of the brand building campaign," he said.


"We see this from our clients as well and video seems to be the linchpin of the strategy. YouTube continues to be driven by the insanely popular channels from some of our top content creators like Breakout hit Epic Rap Battles of History and new sensation Vice News."


Arora also hailed the impact of an initiative launched in April called Google Preferred, which packages together the most popular YouTube channels and sells ads across them up front, in the same way that traditional TV ads are sold.


He said that advertising agency groups Digitas and Omnicom, as well as brands like General Motors, Coca Cola, Universal Pictures and Adidas have all signed up for the initiative. "Our monetisation model in YouTube is working. It’s a phenomenal model. It is now the linchpin of each of our brand strategies if our partners and advertisers want to come work with us to create brand campaigns," said Arora.


"YouTube allows you to actually target a fragmented set of interests in a most efficient fashion, as opposed to try and do burst advertising that you would do in television and broadcast."


Analysts were keen to find out how Google's efforts to fund more original content on YouTube – it's rumoured to be in talks with various Hollywood studios and independent producers to offer $1m-$3m towards new YouTube-only projects – might dovetail with its Google Fiber business, which has made Google a broadband ISP in 34 US cities.


The potential is for Google to effectively become a cable TV provider, except with the channels coming from YouTube as well as traditional networks. "Bandwidths will continue to increase. People’s appetite for bandwidths will continue to grow up," said Pichette.


"It’s clear that people will consume content more and more in a non-linear fashion. And its clear that content will come from different places, not just the traditional mechanisms of cable and television." Meanwhile, Pichette warned analysts not to expect Google's more experimental projects, including self-driving cars, to make lots of money in the near future.


"In some cases like self driving cars, obviously multi-year... we think of kind of half decade, sometimes even a bit longer before... you can get kind of real momentum on revenue and profitability," he said.