Here's What Advertisers Should Note From Google Parent Alphabet's Earnings

By Mike Shields Features Dow Jones Newswires

Google parent company Alphabet Inc. once again posted rapid growth, with first-quarter revenue surging 22% to $24.75 billion.

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The solid quarterly performance exceeded analysts' expectations for both profit and sales. The results may also prove to be a confidence booster for investors that was particularly needed in the wake of recent headlines about some major advertisers boycotting non-search spending with Google.

In mid-March, Google came under fire for allowing ads to run alongside objectionable content like extremist videos on YouTube, triggering many marketers to pull their spending from the video site in certain markets. The company responded by giving advertisers more control over where their ads appear.

Here are the five most important advertising-related takeaways from the search giant's earnings conference call:

1) YouTube doesn't seem to have been hurt by recent uproar over brand safety issues

To be fair, if there is going to be any real financial damage, it's unlikely show up until Google's second quarter, since most of the major brands didn't withdraw spending from YouTube until the second half of March or later.

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Still, it was a bit striking to hear Google executives take such a bullish tone in talking about YouTube. The video site's revenue "continued to grow at a significant rate," said Ruth Porat, chief financial officer for Alphabet.

2) Google did note it's taking brand safety seriously

Google Chief Executive Sundar Pichai noted that YouTube had tackled the problem head on and has been actively engaged in productive conversations with clients about the issue. "We have taken it pretty seriously and we have taken significant steps," he said.

Mr. Pichai also acknowledged creators and the desire to make sure they can still make money on YouTube. "It is super important to us that this ecosystem works well," he said.

3) Mobile search continues to boom

The massive growth of Google's mobile search is not shocking but still impressive, given the conventional thinking not long ago that Google was struggling to transition its potent search ad business to the smartphone.

"The biggest contributor to growth was mobile search," said Ms. Porat. As it did during its last earnings call, Google emphasized how fast mobile shopping -- fueled by mobile search -- is growing in particular.

Mr. Pichai cited the example of the retailer Williams Sonoma, which he said enjoyed a 70% increase in mobile sales year over year.

4) Google made a big deal about machine learning and says it is helping improve ads

Mr. Pichai talked about the artificial intelligence product " smart bidding," which is designed to help predict performance of an ad before an advertiser actually buys it. It has caught on with retailers and app companies, Mr. Pichai noted.

5) YouTube TV advertising isn't a big priority, at least not yet

The subscription streaming service called YouTube TV is only available in five cities so far, and it's still very early days for the newly launched live TV offering, said Mr. Pichai.

The company is first and foremost "very focused on consumer experience," he said. Mr. Pichai also said that TV ads overall have "not evolved at the same speed" as digital ads, and Google now has a "significant opportunity to improve the experience."

Write to Mike Shields at mike.shields@wsj.com

(END) Dow Jones Newswires

April 27, 2017 18:47 ET (22:47 GMT)