Google shares soar on strong results
Shares of Google (GOOG) shot up more than 11 percent to $645 in after-hours trading Wednesday on news of strong results for 2015's second quarter. The company announced $17.7 billion in revenue, representing 11 percent year-over-year growth. Operating income was $4.8 billion, up 13 percent. While net income of $3.9 billion was up 17 percent from the previous year.
"Our strong Q2 results reflect continued growth across the breadth of our products, most notably core search, where mobile stood out, as well as YouTube and programmatic advertising," said new Chief Financial Officer Ruth Porat in the earnings release.
One factor fueling the improvement was the source of advertising revenues. Ad sales on Google's own websites were up 13 percent year-over-year, to $12.4 billion, while revenue on the company's network of member websites, with which it has to split the money, increased by only 3 percent.
However, Google still faces a challenge of falling prices per single ad. The number of paid clicks, or ads that a user clicks on and triggers payment from an advertiser, was up 30 percent. However, the aggregate cost-per-click, or how much the average single ad brought in, was down by 11 percent. The drop on Google's own sites was even greater, at 16 percent.
The continued tension between increasing number of paid ads and dropping amount of income per ad has been an issue for years. As long as Google can continue to throttle up the volume at which people click on ads fast enough, it can make up for the ad rate decline and keep increasing revenue.
Google also has increased its "other revenues" category so that it now makes up almost 10 percent of total revenue. For many years, advertising accounted for almost all of sales. So, the increase other revenue from previous levels of 3 percent or 4 percent is a significant achievement.