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Google in Q3 ’15 earnings report: Google Surges on the Back of Mobile

Published: October 16, 2015

Author: Blair Matsuura

Q3 2015 was another big quarter for all things Google.  After several months of trading in the mid $500s, the Google stock jumped by over 100 points in late July, with July 17th marking the biggest single-day increase in market capitalization in history.  On August 10, Google announced Alphabet Inc., the new conglomerate under which all Google properties will now lie.  Although Google is investing in new businesses and diversifying revenue streams, we believe AdWords is and will continue to be a core business for Alphabet Inc., and that what used to be considered the future of AdWords growth – mobile – has become very much the present. Mobile conversion rates have grown significantly year over year, and mobile is swallowing more and more total clicks as the quarters pass and advertisers’ understanding of consumer engagement on mobile improves.
We crunched roughly 6.2B AdWords impressions from Q3 2015 and compared them to roughly 6.9B impressions from Q3 2014 (note that these include both search and display). Our Q2 assessment backed up the “year of mobile” theme, and Q3 is no different. Year over year, desktop and tablet clicks and impressions have decreased by 10%, while mobile clicks have increased by over 120%.   In Q3 ’14, mobile accounted for 21% of all clicks. In Q3 ’15 mobile grew significantly and now accounts for 39% of total clicks (See below).
The shift in mobile paid media has been driven by market forces and ongoing mobile development by our clients.  Technology improvements, faster phones with LTE and larger screens, mobile maturity (the number of mobile devices in the US now eclipse the number of PCs), and improvements in mobile UI and UX such as mobile apps and responsive and mobile-optimized sites have led have led to a shift in mobile use and user behavior. Mobile is now the primary way users access the internet and is becoming the primary way users interact with sites to make online purchases. Mobile strategy both in media buying and UX have been primary areas of focus for our clients’ business growth for several years, and we are seeing the fruits of this effort.  Optimizing mobile experience is now integral for all online businesses for capturing users where they look to engage.
Over the last year, mobile conversion rates for our clients nearly doubled, and in Q3, mobile conversion rates were in line with desktop for the first time.  This increase in conversion rate occurred while clicks and impressions doubled.  This marks a step forward in performance where both scale and efficiency dramatically improved.  In the past, mobile was seen as an incremental channel where conversion rates are low since users were higher in the conversion funnel. At this point, mobile has become more than just a touchpoint in the research phase; in order to effectively reach customers, mobile needs to be taken as seriously as desktop both in terms of media buying and site investment.
I predict that the rest of the industry is following the same path as our clients and investing more in mobile media.  The Google Q3 earnings call will likely show continued mobile search and display revenue while desktop and tablet revenue either stays constant or slightly declines.

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