Last night Google announced its first quarterly numbers since the addition of Motorola Mobility to its ever-growing business spread. The numbers were solid, and investors have pushed Google’s stock up 3% in after hours trading on Nasdaq.
Headline growth in Q2, including 6 weeks of Motorola revenues, was 35% year-on-year. Forex impacts are, predictably enough, becoming a theme of the current reporting season (e.g. see IBM’s Q2 results) and Google is no exception, with constant currency growth of 39% in the quarter. Strip out Motorola, and Google grew 21% year-on-year, or 25% at constant currency. EPS of $10.12 beat estimates.
The shifts in Google’s business are having a big impact on some of the main drivers of its revenue and profits. Aside from the addition of Motorola, which is adding a lot more device revenue (not to mention an extra 20,000 employees), search and ads are of course evolving too.
Google chief business officer Nikesh Arora told analysts that mobile ads are now “where search was in 1999”. By that he means they are growing very fast but are yet to have their full effect. Nonetheless, Google is already seeing a drop in its cost-per-click (CPC) that’s partly due to the rise in mobile in its ad mix. Indeed CPC was down 16% in the quarter. However, the future should bring a lot more revenue - and revenue per click - from mobile, as use grows rapidly and features like click-to-call and location-based ads help to boost CPC.
As for enterprise services, these are yet to make a major impact on Google’s numbers, despite rapid growth. Arora describes the enterprise business as “serious, small but growing” and claims 5 million businesses use Google Apps worldwide.
One thing that isn’t really changing is Google’s geographic mix. The US still accounts for 47% of total revenues, the same proportion as at the beginning of 2010. That’s surprising, given the rapid shifts in world GDP and internet user share. There’s a glass half empty and a glass half full reading of this: either Google has a massive opportunity to push more decisively into fast-developing markets or it risks losing its pre-eminent role as the web becomes ever more global and more fragmented. There’s undoubtedly an element of truth in both.