Peter Kafka

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Google Hits Its Q2 Numbers, and Wall Street Shrugs

iStockphoto | maybefalse

A first look at Google’s Q2: Earnings of $10.12 per share on revenue of $8.36 billion. The street was looking for $10.05 and $8.4 billion. Remember that this is the first quarter where Google’s results will incorporate the performance of the Motorola unit it bought for $12.5 billion, so deciphering the numbers may take more work for investors.

For now, they seem okay with what they see. Quite often, companies that merely hit Wall Street estimates are punished, because the published estimates aren’t the “real” estimates. But for now, GOOG is trading up a couple percent after hours.

Here, as always, is a “cheat sheet” from Citi analyst Mark Mahaney. Again, note that there are now multiple ways to view Google’s performance. The most important one should be what Mahaney refers to as “core” Google — that is, Google minus Motorola.

Cost per click is down 16 percent, which is what Mahaney was expecting. We’ll see if other investors are okay with the decline — in past quarters, analysts have spent a bunch of time harping on CPC.

Google hired a whopping 21,527 people in the last three months — but almost all of them are Motorola Mobility employees. Net those folks out and Larry Page ended up adding a much more modest 1,234 workers.

Don’t look for Page on the upcoming call: Google has already warned that he is unlikely to show up, due to health problems. Google’s IR page says the call will be hosted by Patrick Pichette, Nikesh Arora and Susan Wojcicki.

Earlier:

4:29 pm: Greetings! Just enjoying a couple minutes of pre-call music from the Google live feed. You can listen in for yourself here.

4:33 pm: Call’s starting. Meanwhile, for people who care about the TV biz: Smart analyst Rich Greenfield says the DirecTV-Viacom standoff is over, or about to be.

4:33 pm: Here’s Pichette, explaining that the Motorola deal means new reporting for Google. He also gets to say “stub period.”

And this is the part where he reads results that Google has already distributed in its releases.

Google core biz doing well against “somewhat difficult” world climate, Pichette says.

4:41 pm: Now on to sales boss Nikesh Arora.

Want to talk about three themes: How big bets on digital advertising are working out, a look under the hood at search and some talk about enterprise.

Arora praises DoubleClick, the ad serving company it bought a few years ago which now serves as the base of its display business. That’s the same deal that led Microsoft to pay $6 billion for aQuantive, a purchase that it wrote off a couple weeks ago, and which put a huge dent in Redmond’s earnings today.

Time to boast about YouTube: People used to say YouTube was groping for a business model. “I think we can now declare we’ve found our model.”

Will that include a boast about YouTube’s revenues, costs, profits?

a lot of people liked our YouTube upfront …

So, no. No YouTube financial numbers. But! AdMob is working out well for us on the mobile front.

4:45 pm: Second theme: “the secret sauce of search advertising.”

Our product teams work really hard — 72 improvements this quarter!

4:46 pm: Theme three: We’re awesome at enterprise. A small but growing business that’s going to be important. Five million businesses that have gone Google worldwide. “You can’t fake a commitment to cloud computing.”

4:48 pm: Now onto a world tour: U.S. and Canada steady. Spain not so great. Northern Europe pretty good.

4:49 pm: Meanwhile, analyst Mahaney weighs in with his analysis of the results: “Reasonably Strong Q2 Results…Noisily Positive.”

Arora spending time discussing the winner of the Google Doodle contest. He’s in second grade, I believe.

4:52 pm: On to product boss Susan Wojcicki.

Wojcicki says she plans to see the Dark Knight movie this weekend. And when she Googled the name of the movie, she discovered it was opening this weekend. So if you never, ever leave the house, listen to the radio, watch TV or surf any Web sites, Google can be very, very useful.

The point of the above anecdote was to show off the Google “knowledge graph” which translates into “the stuff on the right-hand side of the search results page.”

Sorry, Wojcicki just announced a Google+ user number, but I didn’t catch it. I’m sure it will be a number that many people will not believe and that Google will angrily defend.

Wojcicki continuing to list products the company has rolled out or improved during the last quarter, as she does every quarter. I wonder what analysts do during this part. An endorsement for the Google Glass demo with the skydivers.

4:59 pm: Pichette: We now have a Google+ IR page, too. Also, here’s chief lawyer David Drummond.

Q&A:

Q: You said Motorola would be accretive. But it has pretty consistently lost money. How do you fix that? Also, what are the possibilities of Google voice search for mobile?

Pichette: We’re psyched about Motorola. But we just got started. “Nothing really to announce right now. … we have to let them do their work, but I can tell you there’s a palpable excitement at MMI.” Also, if you took some of the one-time stuff and “accounting noise” out of the quarter, it’s pretty good for the mobile side.

Wojcicki: We’ve invested in voice for a while. Jellybean OS allows you to ask questions with voice. A “really amazing technology that is really leading edge on that.”

Q: More on Motorola accounting. How do you sort out purchase price — hard assets v. patents, goodwill, etc. Also, is the Motorola set-top box strategic for you?

Pichette: We break out some of this in the earnings already. As far as the home business: “We’ve just gotten to the place. And we’re in the process of evaluating …” Be patient, please.

Q: On mobile, have you conducted a study on mobile on search query demand? Are mobile queries cannibalistic? Also, on YouTube, how do you give brand advertisers visibility on ROI?

Wojcicki: On cannibalization: We’ve spent a lot of time looking at mobile v. desktop. Complicated, but we think that mobile searches are “mostly incremental” — people search mobile on weekends, desktop during workdays.

Still looking into tablet searches, though.

Arora: For YouTube, direct marketers can see results pretty easily. For brand guys, it’s more complicated. Trying “single-source panels” where we compare ROI to TV.

Q: Can you give us an update on Larry’s health? And how’s Chrome doing on iOS devices? Also, you’re saying things like self-driving cars aren’t big investments, but seems like maybe they are, especially with Google glasses.

Arora: “No more new news on Larry … but he continues to run the company and he’s here and involved” in all the strategic decisions.

(Sorry, missed remainder of answers.)

Q: Seems like hiring Silicon Valley talent is getting more and more expensive. Please talk about that.

Pichette: “The Valley continues to be hot. It’s a hotbed of innovation … we’re delighted by our strategy.” Good retention, recruitment.

Q: What are you seeing with mobile CPC trends? And with Nexus 7, can you talk about content acquisition for video and books?

Arora: Seeing tons of growth in mobile across the board. “Mobile is, right now, where search was in 1999.”

In terms of content: “I think we’ve made a tremendous amount of headway in the content space … we’re making progress across the board.” (Translation: No answer.)

Q: About accounting for Nexus 7 costs.

Pichette: We treat it differently depending on whether we sell it direct or if it’s through stores.

Q: Talk more about geographic mix, please. And a little about TAC, too.

A: (This is the part of the call where I normally imagine myself on a balloon ride and find it hard to track. This one even more snoozy than normal, but I’ll try to stay. on. target.)

Q: (Filibuster, which includes references to CPC.)

Pichtte: I don’t really want to talk about CPC, but I will. Have to talk about it every three months.

Q: Hey, remember when offers was a big deal? You were going to buy Groupon, right?

Wojcicki: Yup, important.

(Pretty sure there has been almost zero info disclosed today.)

(Slipped a bunch of questions.)

(This one, too.)

(And that one.)

Q: Want to tell us how big mobile search queries are? What about other mobile stats?

A: Nope.

Q: Can you talk about Google+ member growth? How’s that going? How can you drive faster? Or should it be organic?

Wojcicki: Overall, we’ve been really pleased with the growth — 250 million Google+ customers. Remember that when you have Google+ you can share. And that Google+ is a “spine” across all of Google. (Basically a non-answer, too.)

Phew. Call’s over.

Image: iStockphoto | maybefalse


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— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik