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Google Q4 2014 Concall: YouTube has over 1 bn users; Programmatic usage doubles

Changes in Google’s policy for its AdSense business, particularly AdSense for search, has negatively impacted the growth in clicks, Google’s chief financial officer & senior vice president Patrick Pichette informed during the Q4 2014 earnings conference call. Pichette mentioned that these policy changes have resulted in fewer clicks, but also higher Cost-Per-Clicks (CPCs).

Paid clicks: Pichette mentioned that Google’s global aggregate paid clicks were up 14% YoY, while aggregate CPCs were down 3% YoY. In terms of monetization by property, the Google site paid clicks were up 25% YoY and Google sites’ CPCs were down 8% YoY. For Google’s network businesses (this includes AdSense, AdMob, AdExchange and DoubleClick Bid Manager among others), network paid clicks were down 11% YoY, but network CPCs were up 6% YoY. Google’s monetization metrics were impacted by a number of factors, including geographic mix, device mix, property mix, foreign exchange, and the ongoing product and policy changes.

Local advertising and new measurement tools: During the conference call, interim chief business officer & special advisor to the CEO Omid Kordestani said that in October last year they announced the launch of product listing ads and local store front. These products provide customers real-time information regarding products in stock in stores near them. Retailers like Macy’s and REI used this local inventory ads during the recent holiday season.

Google also focused on creating new measurement tools, and recently launched estimated store visits metric to their estimated total conversations measurement suite. This will provide advertisers an estimate of the number of times a search ad click will lead to store visit. He also mentioned that ULTA Beauty used this and reported that 12% of clicks on search ads led to a store visit, which resulted in increase in ROI from their AdWords search marketing spend.

Google Shopping: During the quarter, Google witnessed increased activity in their established mobile advertising products, especially Google Shopping. Traffic on mobile devices for Google Shopping increased by close 100% from the same quarter last year. Also, during the holiday season mobile shopping clicks were greater than clicks from desktops.

YouTube: Kordestani informed that YouTube now has over 1 billion users. Time spent watching videos on YouTube has increased by 50% YoY. Also, there has been a significant upswing in mobile advertising on YouTube, which has resulted in YouTube mobile revenue increasing by over 100% YoY.

Google Wallet: Answering an investor question, Kordestani said that the goal is really to remove all the friction that one encounters now in the shopping experience. And what they are really working on here is to move beyond just tap and pay and have a full functional payment system. He mentioned that users can now send to money to friends through Gmail using their wallet app and this functionality was recently launched in the UK. Loyalty, gift cards and more can be stored on the wallet app and buy with the Google button, which essentially makes it possible for users to purchase with two clicks.

Google for Work: According to Kordestani Google for Work had a great quarter. Google partnered with PricewaterhouseCoopers and worked on transferring their business to the cloud. In November, Google hosted its second Google Cloud Platform live event during which it announced several new products, including Google Container Engine.

Digital content business: Kordestani expressed excitement regarding the development of Google Play. He mentioned that movies are now available in more than the 102 countries, music in 58, and books in 65. In December last year, Google had partnered Sony to digitally release the Seth Rogen and James Franco starrer The Interview. The film reportedly generated over $15 million in the first weekend of its release, and majority of these sales were driven by Google Play and YouTube.

Google also launched YouTube music key beta, a monthly music subscription service that provides ad free music, background play, and offline viewing. It includes a subscription to Google Play Music with more than 30 million songs, expert queue rated playlists, and more.

Hardware, Chromecast & Chromebooks: Our hardware efforts demonstrate momentum just in time for the holidays we launched the Nexus 6, Nexus 9, and Nexus Player devices. Chromecast continues to be a hit. Just last week, we saw our 1 billionth tap of the cast button. Chromecast usage per device has increased by 60% since launch due to a growing roster of new apps and features. Chromebooks are now available in 33 different markets and enjoying strong success in K-12 education market in the U.S.

New projects: He mentioned that the majority of Google’s resources are invested in its core products, however the company continues to invest in new innovative ideas like self-driving cars or Loon. At the start of the project small dedicated teams are provided with clear milestones, which they need to achieve in order for further investments. In cases where these milestones are achieved investment is expanded, like Fiber. Google has given the go ahead in 18 cities in 4 metropolitan areas in US for implementation of Fiber. Pichette also mentioned that in case the targets aren’t met, but Google thinks the project is a promising one the team is provided more time to chalk out strategies, like the company did with the Google Glass project.

Areas of focus from Q4: Google had two specific areas of focus from Q4 – programmatic and measurement. In case of programmatic. Kordestani mentioned that all the top 10 global agencies use at least one product in their double click suite. Google primary programmatic buying tool DoubleClick Bid Manager has doubled in volume over the past year.

He also mentioned that there has been a noticeable shift towards programmatic in video as well. Google’s programmatic video marketplace Google Partner Select, which was launched in June 2014, currently has over 50 publisher partners including Hearst Television and Food Network, and brands like BMW. Google has also been investing in developing measurement tools, like the viewability report for ad platforms which was launched in July last year. It provides brands the ability to track if their video ads across digital channels were viewed by customers or not.

Headcount: Google hired just over 2,000 employees during Q4, up 22% from 1700 in the same quarter last year. In total Google ended the quarter with about 53,600 full-time employees.

Interestingly, there was no mention of Google’s plan of launching a WhatsApp-like free mobile messaging app in India and other emerging markets. At the time it was mentioned that this messenger is in early stages of development and is expected to be launched in 2015.

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