Google and YouTube have recently reported impressive financial results for the first quarter (Q1) of 2024, according to an earnings conference call by parent company Alphabet streamed on Thursday.
Google SVP and CBO Philipp Schindler reported that Google Services revenues increased by 14% year-on-year, totaling $70 billion.
Schindler is positive that Google’s growth will at least be sustained, if not further increased, in the future, pointing out that Google Ads tool Performance Max (PMax) is showing a promising start.
“Advertisers using PMax asset generation are 63% more likely to publish a campaign with Good or Excellent Ad Strength. And those who improve their PMax Ad Strength to Excellent see 6% more conversions on average,” Schindler said.
YouTube’s Record-Breaking Ad Revenues
YouTube generated $8.1 billion in ad sales, marking a substantial 21% YoY increase. This marks the video platform’s highest Q1 earnings of all time.
Schindler attributes this growth to the company’s integration of AI solutions.
“As advances accelerate in our underlying AI models, our ability to help businesses find users at speed and scale and drive ROI just keeps getting better,” Schindler said.
“We’re especially excited about the doors gen AI is opening for creative capabilities — helping deliver on the premise of getting the right ad, to the right user, in the right moment,” he added.
Despite concerns about potential competition from emerging generative AI services, Alphabet's strategic investments have proven beneficial, alleviating worries about lagging in the AI race.
Alphabet’s Strong Performance
Google and YouTube’s revenue performance contributed to the overall growth of Alphabet, marking a 15% increase in revenue amounting to $80.54 billion and a 57% growth to its net income computed at $23.66 billion.
These positive results brought Alphabet’s stock up by 11.5% after the conference call, making its market cap reach past $2 trillion.
Goolge (Alphabet) and Microsoft's strong Q1 2024 print last night should lift the markets today: after hours, Google up +11.5% and Microsoft +4.4%. pic.twitter.com/8uNPdreO48
— AJ (@alojoh) April 26, 2024
This is in large part due to the announcement that the tech giant will be paying out its first-ever quarterly cash dividend of $0.20 per share on June 17. This will apply to shareholders of record as of June 10.
Additionally, Alphabet has authorized a $70 billion share buyback program, which will allow the company to repurchase its stock on the open market.
CPC Concerns Linger Despite a Strong Q1
However, amidst these successes, a concerning trend of rising cost-per-click (CPC) on Google Search poses challenges for advertisers and the tech giant alike.
While Google Search ad spend in the U.S. surged by 17% YoY in Q1 2024, the growth in clicks slowed to just 4%, down from 8% in the previous quarter.
Notably, the CPC on Google Search spiked by 13%, a substantial increase compared to the 6% rise in Q4 2023.
Report: Google Search CPC up 13% YoY; ad spend growth slowing https://t.co/szy6RjgVPIpic.twitter.com/WIj8PMcybz
— David Papp (@DavidPapp) April 24, 2024
This surge in CPCs, particularly evident in Shopping ads, presents a considerable hurdle for advertisers, with retail brands experiencing a 40-50% increase in average CPC over the past five years.
Despite the challenges posed by rising CPCs, the performance of PMax campaigns has shown marked improvement compared to standard Shopping campaigns, as Schindler pointed out in the conference call.
While Google and YouTube’s ad revenues are growing, it is taking a toll on advertisers’ budgets.
Alphabet needs to balance its technological advancements with advertiser needs to sustain growth and profitability in the long term.
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