Friday, July 15, 2011
Google's Mobile Strategy Pays Off in Second Quarter
Despite a rocky economic landscape in numerous global markets, Google's earnings prove that the company's bets on its traditional advertising strategy and its new mobile advertising strategy are paying off handsomely. Google says its second-quarter earnings exceeded $9 billion, and that the company would continue making investments.
In good news for the tech sector, Google on Thursday announced earnings for the quarter ended June 30, 2011. Google reported revenues of $9.03 billion.
"We had a great quarter, with revenue up 32 percent year on year for a record-breaking over $9 billion of revenue," said Larry Page, CEO of Google. "I'm super excited about the amazing response to Google+ which lets you share Relevant Products/Services just like in real life."
At a company press conference, Page said the company would continue making significant investments while keeping financial management tight.
"Of course, I understand the need to balance the short term with the longer-term needs because our revenues and growth serve Relevant Products/Services as the engine that funds our innovation Relevant Products/Services," Page said. "But our emerging high-usage products can generate huge new businesses for Google in the long run, just like search, and we have tons of experience monetizing successful products over time."
By the Numbers
GAAP operating income in the second quarter totaled $2.88 billion, or 32 percent of revenues. That compares to GAAP operating income of $2.37 billion, or 35 percent of revenues, in the year-ago period. GAAP net income in the second quarter of 2011 was $2.51 billion, compared to $1.84 billion in the year-ago period.
Google-owned sites generated revenues of $6.23 billion, or 69 percent of total revenues. That's a 39 percent increase over second quarter 2010 revenues of $4.5 billion. And Google's partner sites generated revenues, through AdSense programs, of $2.48 billion, or 28 percent of total revenues, a 20 percent increase. Revenues from outside of the United States totaled $4.87 billion, 54 percent of total revenues. That's fairly consistent with the year-ago period at 53 percent.
Operating expenses, other than cost of revenues, were $2.97 billion in the second quarter of 2011, or 33 percent of revenues, compared to $1.99 billion in the second quarter of 2010, or 29 percent of revenues. In the second quarter, free cash flow was $2.60 billion.
Google vs. Apple
"Google's mobile Relevant Products/Services advertising strategy is paying off royally," said Charles King, principal analyst at Pund IT Relevant Products/Services. "Google reminds me of Microsoft in many ways. They have so many irons in so many fires they are bound to fail more often than they succeed. And the stories of those failures tend to dominate headlines because it's juicier news."
High-profile publicized failures aside, King said, Google's core business is healthy. And despite a rocky economic landscape in numerous global markets, King said, Google's earnings prove that the company's bets on its traditional advertising strategy and its new mobile advertising strategy are paying off handsomely.
"There were some stories published last week on rumors that Apple has drastically discounted the advertising rates for its own mobile advertising strategy. Businesses don't make radical price cuts in their service Relevant Products/Services offering when they are succeeding," King said. "They usually cut costs when those services are having a problem. It's kind of interesting to see Apple slicing rates a week or so before Google announces a fairly majestic bump in earnings driven at least in part by its own mobile strategy."