Google’s power in advertising is still growing, but its second-quarter profits took a major hit with a new fine from the European Union.
The search engine’s parent company, Alphabet Inc., counted revenue of $32.7 billion for the quarter ended June 30, a 26 percent increase over the same period last year, on net income of $3.2 billion, a 9 percent decrease. But this was mainly due to a record 4.34 billion euro fine levied against Google by the European Union antitrust regulators, who found the company used its size to strong-arm smartphone-makers to preinstall its apps. Without the fine, profits would have been $8.27 billion, an increase of 31 percent.
Investors don’t seem to mind the temporary dent in earnings either, which came in at $4.54 per share with the fines and would have totaled $11.75 without. Shares of Alphabet rose 3.5 percent in after-hours trading to a new all-time high of $1,252.
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Nearly all of the company’s revenue stems from advertising services with Google, which brought in $28.09 billion during the quarter, an increase of 24 percent. Total acquisition costs also grew 26 percent during the quarter, to $6.42 billion, equal to 23 percent of all advertising revenue, compared to 22 percent a year ago.
“We’re pleased with the ongoing momentum in our advertising business,” Ruth Porat, Alphabet and Google’s chief financial officer, said during a call with financial analysts. “As discussed previously, we continue to identify new opportunities through innovation including the benefits of applying machine learning to create more useful experiences for users and advertisers.”
Sundar Pichai, chief executive officer and director, continue to talk about machine learning and artificial intelligence improving Google products and its mission “of making information accessible and useful to everyone in new ways.” He pointed to Google’s News app, which uses machine learning to highlight top stories from “trusted” sources, and noted the company’s belief of its “need to deliver high-quality information and news to users and support the news industry as we do so.” The Google Assistant is also continuing to leverage the technologies, and by the end of the year will be available in 30 languages and 80 countries.
On the advertising side, Pichai highlighted YouTube, which is still “growing tremendously” and seeing positive results with a redesigned music service and a re-branded premium video and TV subscription service, feature original programming. Advertising products have also been revamped somewhat, with its core Google ads product now including an analytics for larger marketers and agencies, along with ad manager, a “monetization engine for publishers,” and responsive search ads, which helps marketers optimize in real time.
Pichai added, whether it’s with people using search or another Google product or advertisers coming to the platform, he wants “Google to be the [solution] you think of when you run into a problem.” He used a spike in the use of Google Translate during the World Cup as proof that this is already happening, but said continued investments in AI, machine learning and expansion globally are part of it, too.
“[The usage spike] to me shows that when people are running into new things, new experiences, when they have questions on their mind, Google is what they’re reaching out to,” Pichai said.
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Google Ad Revenue Climbs, but Pichai Highlights Privacy, News Efforts