Q2 Earnings: Google Got 10M Google+ Users in Two Weeks (And Plussed Its Revenues, Too)
With one good quarter and one major product launch under his belt, new Google CEO Larry Page showed his face — or at least his voice — on Wall Street today.
For Google’s quarterly earnings call with analysts, Page offered some prepared remarks (and then immediately posted them on his Google+ account!), delivering notable benchmarks including 10 million Google+ users registered in just two weeks, 550,000 Android device activations per day, and 160 million users for Chrome.
Meanwhile, in the second quarter, Google had $6.92 billion in net revenue and non-GAAP earnings per share of $8.74.
Wall Street expected $6.54 billion in revenue and $7.87 worth of earnings per share, so after-hours trading immediately drove Google shares up more than 10 percent, where they stayed throughout the earnings call.
Shareholders and analysts (and reporters, too!) especially wanted to hear from Page himself, which Google acknowledged (you get the sense Google CFO Patrick Pichette was particularly grateful to have his boss on hand).
Here’s Page’s bubbly comment for the press release: “We had a great quarter, with revenue up 32% year on year for a record breaking over $9 billion of revenue. I’m super excited about the amazing response to Google+ which lets you share just like in real life.”
Some more financial specifics: Google continues to grow headcount fast, as it said it planned to do. It effectively added 2,452 employees in the second quarter, plus 450 more through its ITA acquisition.
Just a few categories were down marginally from previous periods: non-GAAP income was 37 percent of revenues, compared to 39 percent a year ago. And paid clicks were down 2 percent from the first quarter of this year, though cost per click was up 6 percent.
Previously, Google’s stock price had not been happy since Larry Page retook the CEO role and missed earnings (both the numbers and most of the analyst call), though recently shares had been boosted by the launch of Google+.
Here’s the revenue chart, and below that our liveblog of the earnings call:
1:31 pm: Waiting for Google to get started. Here’s the webcast link.
1:32 pm: Here’s the starting line-up: Larry Page, Patrick Pichette, Susan Wojcicki, Nikesh Arora.
Page: “It’s really exciting to be on the call today and share directly with you the progress we’ve made in my first quarter as CEO.”
“The new management team is working together fabulously.”
First up: Google+. It’s about precision of sharing. “Not surprisingly, this has been very well received.”
Page: “The growth of Google+ has been great and I’m excited to share numbers.” Ten million members, over 1 billion items shared and received per day and +1 buttons served 2.3 times around the web per day.
Back in the day, nobody believed search would grow, Page says, but with businesses like Android and Chrome “it feels like we’re watching the same movie again [sped up].”
1:41 pm: He’s telling us what he’s going to tell us: old products, then growing products, then new products. “We’re probably even a little ahead of where we need to be in headcount growth.” Oh, and don’t worry about “small speculative projects” like driverless cars. “We’re careful stewards of shareholder money and we’re not betting the farm on this stuff.”
Page: “We’re only at 1 percent of what is possible. Google’s just getting started, and that’s why I’m here.”
Pichette now gets to make the biggest announcement so far: “Larry’s going to stay with us for the Q&A.”
Pichette: Growth rates are strong, despite seasonally slower quarter.
International revenue was up 38 percent year over year, $4.9 billion in revenue.
1:48 pm: Google shares in after hours are now trading at $584.48, up 10.5 percent. This has been pretty consistent since the release dropped.
Now over to Arora, who says core areas like search and new areas like display mobile and enterprise are doing well. Large customers spending more and reaching more small advertisers. Google sales teams are getting better at integrated solutions, which improve customer ROI, he says.
Display: Healthy, happy, etc.
YouTube: Over 3 billion daily views. Royal Wedding live broadcast had 100 million YouTube views. T-Mobile takeover launch on YouTube reached 46 million unique users.
Mobile: 550,000 Android device activations acting as accelerator to mobile advertising.
Regional breakdown: Tremendous growth in emerging markets like Brazil and Russia.
Arora continues: “Tremendous effectiveness” of own advertising campaigns like “the Web is what you make of it” for Google Chrome.
1:55 pm: Wojcicki takes over to talk about product impact.
Search: Voice and image search brought from mobile to desktop. (Our coverage here.) Plus more than 100 other improvements.
Mobile search: 135 million Android devices activated in total. 6 billion Android apps downloaded. This week started renting movies and selling books, and previously launched music beta.
Also testing Wallet and Offers.
On ads specifically: small tweaks have had big impact.
Display advertising is moving to a scientific model with real-time bidding.
Traffic on AdMob network up more than 3.5 times in the past year, so launched tablet-specific formats.
Strong performance from YouTube skippable ads, up to 1/3 of all ads in YouTube after only launching in December. The people who choose to watch them much more engaged.
Chrome and Chromebooks doing well too. But coolest thing Google did in the quarter, according to Wojcicki: Les Paul doodle had users create 40 years worth of music.
2:02 pm: Now questions. What’s driving international growth? What’s your patent strategy?
Arora: International growth is because everything is growing. Japan more driven by display and mobile, for example. More pick-up of display and mobile in general, and more total advertisers.
Page: “Obviously we have a lot of patents. And Android’s on a tear. 550,000 daily activations, 400 devices … a whole bunch more stats. … Despite some of the efforts of our competitors, there hasn’t been a slowdown. We want to support that ecosystem in a cost-effective manner.”
Question about velocity and efficiency of decision making. Plus, how important are social search signals? (These are some odd question pairings!)
Page: “I’m super excited about these changes we’ve made. More product-focused structure now. Maintaining and improving our velocity and execution is a really noble goal for us.”
Wojcicki: We’re very early on social. Really our focus with Google+ will be user experience. From a targeting perspective, keyword, contextual, demographic are important, and social over time would be one of many ways we target. Ads have +1 buttons too.
Question about focus on mobile and Google’s larger economic thinking post-Eric Schmidt. Arora answers that mobile is great.
Page: “Eric is a great partner and leader for Google and for me and continues to play a big part in the company. Search and ads are core driver. Then YouTube, Android and Chrome are big consumer successes. Then Google+, Commerce and Local are exciting and early stage. We don’t do things that we don’t think will generate really big success over time.”
2:11 pm: Question about future plans for Google+, and strategy for Google Offers.
Page: “Google+ has a lot of interesting product integration. The black bar you see is an entry point and notification point across basically all of our properties. There are many things you’d do with + and +1 that affect search results. We are focused on improving the identity and sharing across all of Google.”
Arora: Offers is not isolated, it’s a larger commerce plan. We’ll test and look at the model and then rollout the next version.
Questions about paid clicks, and Panda quality changes.
Wojcicki: Richer ad formats give opportunities to make ads better for users. We hope better experiences give better click throughs and conversions. Click growth comes from factors like query growth and backend quality improvements.
On Panda, she adds: Search quality changes sites’ ranking, so some sites may have benefitted from Panda but may take time to adjust their monetization strategies.
Questions about how focused Page and management are on the stock price, and also the local opportunity.
Page: “We have a lot of stuff to do and unfortunately one of the things we don’t get to decide is our stock price. You all are in charge of that.” We focus on profitability and revenue growth as a long-term view.
Wojcicki: Local can be the large retailers like Starbucks, or small Joe’s coffee shop. We are working on AdWords solutions for both of them. Google Boost is a one-page five-minute signup for advertisers. We haven’t marketed it a lot yet but we will make it more known. Plus, Pichette reminds her, mobile is local and integrated as well.
Oh sweet, Larry Page put his notes for his remarks up on his Google Plus account. Here they are.
Page now answering a question about product integrations. He’s excited about the visual redesign, including the black bar that goes across products and links to Google+. We want to make products beautiful and consistent, he says.
More on Google+ from Page: “We’ve been very excited about the growth we’ve seen and the engagement we’ve seen, over 1 billion items shared and received in a single day. It’s very early days, less than two weeks since we released it in field trial.”
Long term plans for Plus?
Page: “We want to make products people use every day, like their toothbrush. So that’s how we think about success there.”
Pichette on local: Maps plus mobile plus Wallet equal the pieces of the local puzzle. “If you look at the arsenal we’re growing, it’s really quite formidable.”
Questions about headcount and display.
Pichette and Page say their headcount plans are playing out as planned.
Wojcicki: YouTube is our largest o&o on display. But we also want to make it easier to buy and sell display advertising, and to help millions of sites sell display and use our targeting.
Questions about cost-per-click growth and how Google+ will offset social media switching costs.
Wojcicki: Ad quality and increased visibility drives CPC.
Page: “We’ve been really excited about Google+ really improving the overall experience like how you would share in real life. [I don't think that's something other products offer.] And we’re getting great reviews on that. And there’s a lot of magic built into the product that exposes that.”
Page continues, in a more specific Facebook offensive: “Google believes in users owning their own data and we think some of our competitors don’t believe that, but we think users will move to services that are in their best interest.”
Pichette downplays infrastructure costs.
Page on hiring: “Compensation is having an even more positive effect on hiring and retention than we expected. There’s more people who want to work at Google and who want to stay working at Google.”
Pichette gives special thanks to Larry for joining, plus Susan and Nikesh. And to all the Googlers, especially the Google+ team.