Google's second quarter performance turned out surprisingly good, as the company beats profit expectations.
The Internet search giant reported $6.99 earnings per share, while analysts were expecting about $6.70. Google (GOOGL, Tech30) generated $17.7 billion in sales over the past three months, an 11% growth from last year. Wall Street was looking for about $17.8 billion to $18 billion, a 13% acceleration. Overall the company made $3.9 billion in profits.
While more people clicked on its ads in the second quarter than last year, businesses still shied away from spending. The amount of money advertisers paid for clicks dipped 11% -- the ninth consecutive quarter of negative growth.
One of the biggest reasons for the decline has been mobile. Although many now surf the Web primarily through phones, they are still more likely to buy products online through desktops. Advertisers, therefore, tend to spend more to target shoppers on desktops than on mobile.
The other reason is Google's video platform YouTube, where businesses are even less likely to spend money on ads because they say it doesn't generate the kind of sales leads they want.
Google has made numerous improvements to both of these areas in the past few months. To help people make faster decisions to buy things on their phones, the company's mobile search ads now show much more information than before.
Paid search results for a camera, for example, will provide product ratings, features, and inventory in nearby stores. This is a huge upgrade from what mobile search ads used to be, which was just some text and a link.
"We continue to close the gap between mobile and desktop search," Ruth Porat, Google's CFO, said during the earnings call.
But the biggest change to Google's mobile search strategy came this week when it launched a buy button in its search ads. Clicking on a Google ad with a buy button will take users to a dedicated shopping site where they can complete a purchase in about two clicks. Transactions are processed through saved financial information stored within Google accounts.
"The buy button has the potential to change advertisers' willingness to [spend] on mobile," Mark Ballard, Merkle RKG's director of research said that: "Search is probably the best performing type of digital ad because you're capturing someone's intent and interest at a specific time."
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