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Google Parent Alphabet Reaps Advertising Rewards

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

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Strong quarter for Google’s parent powered by advertising strength, YouTube and other services

Google’s parent Alphabet has posted a 20.2 percent rise in sales as its domination of the mobile advertising sector (alongside Facebook) continues to drive earnings.

But other divisions also contributed to the success including YouTube and Google’s various cloud services.

Advertising Strength

For the third quarter results ending 30 September, Alphabet posted a healthy rise in net profits to $5 bilion (£4.1bn) from $4 billion (£3.3bn) in the same year ago quarter.

There was equally good news for revenues which rose 20.2 percent to $22.4 billion (£18.4bn) from $18.7 billion (£15.3bn) in the previous year.

GoogleThe bulk of Alphabet’s sales are derived from advertising revenues. Indeed, Google’s ad revenue rose 18.1 percent to $19.82 billion (£16.3bn) in the third quarter, and account for 89.1 percent of Google’s total revenue.

A little digging revealed that Google is profiting handsomely from paid clicks, (where the advertiser pays only if a user clicks on an advert). Alphabet reported that paid clicks rose 33 percent when compared with the same year-ago quarter, but this was tempered as cost-per-click (or the average amount advertisers pay Google) fell 11 percent from the previous year.

“We had a great third quarter, with 20 percent revenue growth year on year, and 23 percent on a constant currency basis,” said Ruth Porat, CFO of Alphabet. “Mobile search and video are powering our core advertising business and we’re excited about the progress of newer businesses in Google and Other Bets.”

Last year Google restructured itself and formed Alphabet, an umbrella company that includes the flagship Google web properties as well as ‘other bets’ (or moonshot projects) such as driverless cars, Project Loon, a health research unit (Verily) and connected home devices maker Nest.

And it seems that sales from ‘other bets’ is on the rise as revenue rose to $197 million, thanks to mostly Nest, Fiber and Verily.

Mobile Play

Google has also created a stir earlier this month when it launched its new Pixel smartphone, the first ever handset to be designed by the company “inside out”.

The firm had previously partnered with third party manufacturers for flagship ‘Nexus’ smartphones but this is the first time it has taken control of the entire project.

It is too earlier to say what Pixel will contribute to the bottom line, but Google’s move here is in stark contrast to that of Microsoft, which has effectively retreated from the global smartphone market.

But that is not to say that everything is going Google’s way at the moment. Earlier this year Alphabet) reportedly put its robotics division (Boston Dynamics) up for sale, two years after buying the company.

And this week it was revealed that Google Fiber rollout in the United States is being scaled back.

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