Of the various figures put out in Alphabet/Google's (GOOGL) first-quarter earnings report, none looms larger than 53%. That's the annual growth rate recorded for paid ad clicks and impressions on Google's own sites and apps.
Let that figure sink in for a moment. Google, a company that did close to $80 billion in ad sales last year, one that's more than a decade removed from achieving search dominance, managed to increase the number of ads it was paid for on its own properties by over 50%.
The figure says a lot about how much smartphone activity continues to grow Google's addressable market, and how effective it has become at monetizing this activity.
Alphabet reported Q1 revenue of $24.75 billion billion (up 22% annually) and EPS of $7.73 (up 28%), topping consensus analyst estimates of $24.22 billion and $7.38. As of the time of this article, Alphabet's Class C shares are up 4.2% to $929.00 and making new highs. They're now up 17% on the year.
Paid clicks rose 44% overall, with the 53% growth on Google properties partly offset by the more modest 10% growth (still better than in recent quarters) on non-Google sites and apps. That figure is still better than the 39% and 32% growth respectively seen in Q4 and Q3 of last year after accounting for a change in how Google records paid clicks. Not surprisingly, CFO Ruth Porat said mobile search growth remains the biggest driver behind Google's paid click momentum, with YouTube and programmatic (software-automated) ad sales also playing roles.
Weighing on revenue growth: Google's cost per click (average ad price) fell by 19%. That's larger than the 15% decline seen in Q4, and stems from a continuing shift towards smartphone search, YouTube and programmatic ads that carry lower prices than PC and tablet search ads. In addition, traffic acquisition payments (TAC) continue to rise due to mobile ad revenue-sharing payments to smartphone OEMs, carriers and developers: TAC was equal to 10% of Google properties ad revenue, up from 8% a year ago, and 22% of total ad revenue.
On the other hand, the "Google Other" reporting segment, which covers non-ad businesses such as Pixel phone sales, Google Play transactions and cloud apps and services, once more provided a lift. Its revenue rose 49% to $3.1 billion, and is now equal to 15% of ex-TAC revenue. The "Other Bets" segment, which covers businesses such as Google Fiber, Nest, Waymo, Verily (healthcare tech) and Google's investment arms, saw revenue rise 48% to $244 million. But it also posted an $855 million operating loss (up 10%).
As much as things like the Pixel and self-driving cars get more media attention, Google's bread-and-butter search ad business is still easily its biggest profit growth engine. And for all the concerns that have understandably existed about mobile users bypassing Google Search in favor of going directly to apps -- Amazon.com's (AMZN) shopping app especially -- the business' addressable market keeps growing thanks to three trends: Smartphones are growing total search activity, e-commerce keeps taking share from offline retail and the use of mobile ads to get consumers to shop at local/offline businesses continues to grow.