Google Q3 Earnings: Bounce Back Time

The year 2020 has certainly seen its share of special events. One of these happened after Q2 finished, when Google reported a decrease in earnings for the first time in its history. And while that statement may pale compared to the other historical events of 2020 when we look back on it ten years from now, the information was still quite impactful for those people in e-commerce that had never seen it before.

Perhaps unsurprisingly, Google bounced back strongly with a more optimistic story as it reported its Q3 results. Revenue increased 14% for the quarter led by strong growth in YouTube and Cloud.

Some highlights in the quarter:

  • Revenue increased 14 percent for the quarter (15% on a constant currency basis) totalling $46.2 billion.
  • Advertising revenues were $37.1 billion — an increase of 9.8%.
  • Search revenues were $26.3 billion — an increase of 6.5%.
  • YouTube ad revenue was $5.0 billion — growing 32.4%.
  • Google Cloud revenue was $3.4 billion — growing 44.8%.
  • Other revenue, which includes Google Play, Hardware and YouTube’s non-advertising services, was $5.5 billion — growing 35.3%.
  • Operating income was $12.6 billion, up from $10.7 billion a year ago.
  • Hiring lasted, and Google now has 132,000 workers.
  • Paid clicks rose 27%, average cost per click diminished by 15%.

1 trend we observe very closely is the slowing growth rate of Google’s core search marketing business. For Q3, Google Search revenues were up 6.5% that was significantly better than Q2 nevertheless still was supporting the growth rates reported by Facebook (22 percent ) and Amazon (51 percent ).

During the past several months — since the pandemic took hold — Google extended free possibilities for merchants. In the beginning, merchants were given the capability to list products for free at Google Shopping. More recently, Google announced the Purchase on Google program will have zero commission rates also. These changes are all about improving the”comprehensiveness” of heart Google Search. The concept, of course, being that if customers do not feel as their search results represent the universe of products that are available, they will search elsewhere. Based on Q3 results, it does not appear that these changes have negatively affected the growth in paid clicks. In actuality, maybe the opposite is true. Paid clicks rose by 27%, which was the maximum growth rate since Q2 2019.

So, is Google back? We would argue that, for retailers and brands, the search giant went anywhere. And it’ll continue to be among the main channels for reaching consumers both online and in-store.

It’ll be interesting to see how the holiday season shakes out as everybody in e-commerce prepares for another record season for online shopping.