3 Reasons Google, Inc Stock Could Rise

By Markets Fool.com

As usual, there were a number of specifics Google management wouldn't comment on, but it was clear the search king put together another strong quarter to kick off 2015. Concerns? Its cost-per-click, or CPC, rates continued to decline -- though Google CFO Patrick Pichette had a muted explanation for that -- and mobile search is still an issue, but all-in-all, fiscal year 2015 Q1 was a hit.

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The question going forward is whether Google can continue its strong run -- its stock price is up over 4% from where it was just a few days prior to announcing earnings. Only time will tell, but there are several arrows in Google's quiver that bode well for a strong 2015, and beyond.

It's all about video
As Google's primary digital advertising competitor Facebook is learning first-hand now that it has rolled out video spots to its 1.44 billion monthly average users, or MAUs, old-school banner ads are quickly fading. There's a reason Facebook was able to charge its marketing partners a reported $1 million a day to simply test video ads on its site: combined with comprehensive analytics -- something Google is also extremely adept at -- video spots work.

The good news for Google is its YouTube property is far and away the most popular video-related site on the Internet, and according to Pichette, it's growing both in popularity and its impact on Google's top and bottom lines. Naturally, Pichette or none of the other Google executives on its quarterly earnings call would break out YouTube-related revenue specifics, but he did say "YouTube is growing, and continues to make up a larger piece of total revenues."

Considering YouTube already boasts over 1 billion users, has more than a million advertisers, and "partner" revenue was up over 50% last year, the notion that it's continuing to grow and add appreciably to Google's already impressive financial results is something long-term investors can hang their hat on.

No problem with mobile
Consumers shift to mobile devices has long been blamed for Google's continued decline in CPC rates. Once again, CPC rates declined last quarter: 7% compared to Q1 2014 and 5% sequentially, but there's a bit more to Google's mobile story. Aggregate paid clicks jumped 13% overall last quarter, and the number of paid clicks on Google sites grew a whopping 25% -- more than compensating for the CPC rate decline.

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According to Pichette, the other part of the CPC discussion involves its YouTube "TruView" ads. The majority of Google's TruView spots are "skippable," which means they "currently monetize at a lower rate than ad clicks on Google.com." If not for TruView spots, as per Pichette, CPC rates would be "healthy and growing." Yes, if that seems counter-intuitive you're not alone, however it does speak to the positive impact of Google's retooled, constantly improving mobile search efforts.

Those "other revenues"
A key contributor to Google's 12% year-over-year growth in revenues last quarter was its 23% jump in revenues from its non-advertising unit. Though the $1.75 billion in other revenues was a small slice of Google's Q1 total sales of $17.26 billion, it's likely to become an even bigger piece of the revenue pie going forward. In addition to tossing its cloud-related revenues into the other revenue mix, Pichette cited Google Play as a key driver of the unit's growth.

There are literally billions of apps downloaded annually, and by sheer volume no one can touch Google Play. Sure, longtime nemesis Apple currently generates more app revenue than Google despite less volume, but as last quarter demonstrated: Google is making strides.

By no means will Play become its primary driver of revenue: Google has been, and will continue to be, the king of digital advertising. But further diversifying its "other" revenue streams via Google Play -- not to mention Fiber, cloud, and now its new wireless service, to name but a few -- will help fuel growth long into the future.

The article 3 Reasons Google, Inc Stock Could Rise originally appeared on Fool.com.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.