Google Explains Its Fourth Quarter
Google revenue grew 17 percent year over year in the fourth quarter of 2013, but the amount it made per share was just less than analysts expected: $12.01 compared to a consensus estimate of $12.26.
Executives including CFO Patrick Pichette will explain the financials on its quarterly earnings call, which we’ll be covering live.
As drawn from Google’s slides, the company is looking to highlight a downward motion — though it may be slight — on the amount of money it spends on traffic acquisition as a percentage of advertising revenue.
We’re also hoping for discussion of the Motorola Mobility sale to Lenovo, recent patent agreements, and other action especially around the smartphone ecosystem.
Call starts: Nikesh Arora and Patrick Pichette will be holding down the fort this quarter. Pichette warns they may not answer all product questions, as they’re the business and finance team.
Yesterday’s big $2.91-billion Motorola sale is “great news for Motorola and the Android ecosystem,” Pichette says.
Pichette’s recap stats include the fact that Google now has 48,000 employees.
Pichette says Google expects its new long-awaited Class C shares to trade in April after its dividend is issued. The new shares will trade under the GOOG ticker, while the existing shares are under GOOGL.
Arora talks performance advertising: he says growth comes from increased search activity. Arora says of Google’s big enhanced campaign revamp for its ad tools, “Advertiser’s ROIs don’t lie,” and gives a couple examples. He is blipping through all the ad areas quickly, including brands on YouTube, where three marketing videos were among the top 10 videos last year, for the first time.
As for new businesses: Google Play and Chromecast got more content and features, there were new Chromebooks from Dell and Toshiba, Google Compute Engine became generally available. Arora says the marketing team deserves credit for boosting some of those new products over the holidays.
Altogether, the recap seems more subdued without Larry Page talking about how excited he is about everything. Now onto analyst questions.
Q: What’s the deal with Nest? Was the appeal the design team or the product?
Pichette: “Nest and Google share a real common vision. Both of us believe technology should be doing the hard work so people can get on with their lives. So our goal with Nest is to help them scale. … Being able to attract people like Tony and Matt to the team is really wonderful.”
Q: What’s up with YouTube revenue growth?
Arora repeats what he said about YouTube, says it’s key for brands because visual and video.
Q: What’s up with OCR tagging from Nielsen and in-house metrics?
Pichette: There’s a lot of work to be done around measurement and metrics, we are working on our own more dynamic metrics. OCR — which means “online campaign ratings” — is table stakes.
Q: Google doesn’t do much in app install marketing, right?
Pichette: Yes, clearly, that’s become a larger market. We have solutions as part of AdMob and AdSense for app installs, but yes this is an opportunity.
Q: Lots of identity-based ad targeting in the market, instead of cookie-based. What’s Google doing about it?
Pichette: While making sure users have control and transparency, our teams are working on this, too.
Q: What’s up with Google Wallet?
Arora: We’re trying to reduce friction from search to buying something. This is an important team internally and it gets help from all the Google Play users we have.
Q: How’d you justify marketing costs?
Pichette: We spent on Chromecast and Nexus 5 as well as Chromebooks because they’re good products.
Q: How are product listing ads going? (This is the new Google Shopping thing, where people have to pay to be included.)
Arora: We added eight more countries this quarter, it’s great.
Q: What were the politics around Motorola?
Pichette: This is a transaction where everybody wins. Motorola has really strengthened our Android ecosystem. “As you know from Nest and Glass, we continue to be committed to hardware in areas which are enterprising, promising new frontiers.”
(Kind of a bland comment, but there’s a little bit of a dis there on smartphones being old news.)
Q: Another question about product listing ads and retailers.
Arora: As you get mobile, you get even more bite-sized answers. People are declaring their intent when they want to search so we want to help retailers sell things to them with less friction. We are working on insta-buy, other ways to make that better.
Q: Enhanced campaigns update?
Arora: It’s been a year, it’s fully embraced. More and more, we’re seeing that people do not distinguish the activity they make on different screens. Which means advertisers should be agnostic, they should want to reach the user wherever they are.
Q: Mobile product strategy — since users are in apps all day, not search like on PCs, how does Google insert itself?
Pichette: Rather than thinking about mobile, it’s about “living with the user.” Our agenda is so much richer [when it’s not just basic search].
Q: How’s monetization of local going? Is geo helping ads?
Arora: We’re experimenting with new ad formats on Google Maps. Location gives you better understanding of where users are (um, yup!) across all our apps and experiences, not just maps.
Q: Why is it that big-league sports content isn’t on YouTube and Chromecast?
Arora: We’re very happy with YouTube user and content and monetization growth. We talk to content providers large and small. It’s hard to comment on a particular piece of content but we would welcome any content on YouTube with the right economic model.
Q: Is that new Nielsen measurement thing driving advertisers to YouTube?
Pichette: On brand, it’s a different metric: how many people were you trying to reach. We’re looking for more sophisticated measurements in the coming years.
Q: What are you going to do with all this cash? Does the cash pile need to generate a return?
Pichette: Nest was an offensive and defensive acquisition, we’ll work to get the best return on investment for our investors. We take this issue seriously.
Q: On advertising, what’s up with Google+ and YouTube competing with other social products?
Arora: Yes, there are other companies beginning to absorb digital ad spend. But we still get a lot. In the long term, every part of advertising becomes digital. We’re still in the very early days of how much moves over from TV, etc. Places like Google+ and YouTube are still in their infancy. We don’t want to overwhelm users with tremendous amounts of advertising.
Q: What’s up with the Android ecosystem?
Pichette: We’ve always had clear objectives to support all of our partners. Especially after selling Motorola, “We’ll continue to be this impartial supporter of the entire ecosystem.”
Q: Question about enterprise pricing.
Arora: Google Apps has steadily growing revenue. Every business has to be on a cloud platform. People make decisions based on more than price.
Pichette: In conclusion, welcome to 2014. We’re totally excited about this coming year. (Oh that’s good, even with Mr. Excited himself, Larry Page, gone, someone has to use his favorite adjective!)
Arora talks performance advertising: He says growth comes from increased search activity. Arora says of Google’s big enhanced campaign revamp for its ad tools, “Advertiser’s ROIs don’t lie,” and gives a couple examples. He is blipping through all the ad areas quickly, including brands on YouTube, where three marketing videos were among the top 10 videos last year, for the first time.