Google Profits Surge on Strong Ad Demand | Hacker News Reader

Google Profits Surge on Strong Ad Demand

wsj.com

197 pointskartD167 comments

Amazon, Facebook , Google - three stocks to rule the world. They cannot do any wrong, and I don't mean that sarcastically. Buying these stocks is like investing in the companies that are building the matrix, but it's real life.

It's just nuts..even Microsoft and Cisco in the 90's..the growth was finite, but there is no limit to Facebook, Google and Amazon. Every quarter is a crusher..over and over, year after year.

Just when you think their growth is 'stalled out', something new comes along. Now it's mobile.

The small mobile screen is perfect for advertising. Adsense ads are everywhere. Sometimes major brands try adsense alternatives but always go back because adsense pays the most and has the most advertisers.

> in the 90's..the growth was finite, but there is no limit to Facebook, Google and Amazon.

"This time, it's different."

Reminds me of the phrase,

"When your barber starts giving you stock tips, it's time to sell"

What if the barber is the one who said this?

Russell's lesser-known paradox.

Does the barber shave himself or not?

Sell the barber.

I like that this phrase can be used to condescendingly dismiss two opposite viewpoints.

"Automation and globalization are going to destroy the world." -> "We've been saying that for a hundred years." rolls eyes "This time, it's different."

"Current tech companies might actually have a legitimate sustainable business that won't be totally obliterated in an imminent market crash" -> "Remember 1999?" rolls eyes "This time, it's different."

In all seriousness, though, we had one dot-com bubble; I am not sure it's wise to extrapolate that all tech companies now and for all time are doomed to fail after a few years. Particularly since the companies listed are actually profitable.

Huh? The companies mentioned were Microsoft and Cisco, two companies that were and are profitable. The "this time is different" was dismissing the idea that somehow growth is unbounded for this new crop of companies. No one mentioned the tech bubble of 2000ish or claimed that no one could build a sustainable tech company.

"This time, the stocks are generating cash profits"

Reminds me of the Nifty Fifty https://en.wikipedia.org/wiki/Nifty_Fifty

They were supposed to be big buy and hold forever stocks. Interestingly looking back if you had bought and held for decades you would have done ok with the food type ones - McD and Coke and poorly with tech like DEC and Kodak. It's hard to build a tech company that will still be good 30 years later.

I predict that in the next 10 years you're going to see major shifts and companies like Facebook will be eaten for lunch

Zero chance of that. Facebook will be doing $16 to $20 billion in profit within five or so years. They'll have accumulated $60 to $80 billion in cash. They'll have a half trillion dollar market cap in the next few years. They'll liberally use the cash and market cap to buy into any market they're missing out on, just as Microsoft purchased LinkedIn and Skype to try to stay in the game.

These types of companies do not dislodge so easily such that they get "eaten for lunch" in the mere span of ten years. It's the exception for one of them to implode. This is especially true given that Facebook is still ramping, their sales growth is still extraordinary and their daily actives are still growing just fine for their size. They likely won't even peak on users for a few years, at a minimum; and afterward, they still have years to grow their non-US ad business a lot, because that part of their business is wildly non-optimized.

In ten years, Facebook will just be reaching the equivalent business plateau that Microsoft hit circa 2000-2003. They're still a very young business in the first half of their growth phase, they haven't even reached mild stagnation yet. A business doing $2 billion in quarterly profit, growing sales at 50%, and they're going to get eaten for lunch within a decade? It's extremely unlikely, as the mountain of cash they're accumulating will buy their continued place in the ecosystem, whether the anti-FB crowd likes it or not.

With logic like that it's remarkable that our markets aren't dominated by 50, 100, 200, even 500 year old goliaths.

"They're big! They'll be here forever and only get bigger!"

Standard oil, founded 1870, is worth well over $600 if you count the companies it was broken into (ExxonMobil, Chevron, Amocco before its purchase...)

Cargill, founded 1865, makes over $120B of revenue annually. (That's half of Apple, but two Google). Probably worth around $300B

GE, founded 1892, $286B

IBM, founded 1911, $154B

JP Morgan & Morgan Stanley, both descendents of 1854's Peabody, Morgan & co: $300B

Ford, founded 1903, $50B

The Erie Railroad [1], founded 1832, bankrupt in 1859, 1878, 1893, 1938, and 1976, now largely in disrepair.

Woolworths [2], founded 1878, the first department store in the country, once owned the tallest building in the world. Started losing market share to Sears & catalog retailers in the 1930s, defunct in 1997. Sears was itself eclipsed by WalMart, which is on the verge of being eclipsed by Amazon.

International Mercantile Marine [3], owners of the Titanic, once monopolized shipping so thoroughly that the British government paid to keep Cunard (its only competitor) alive. Bankrupt in 1916, sold White Star Lines in 1926 to a company that collapsed in 1934, lost 2/3 of its fleet in the 5 years between 1930-1935, acquired in 1931, divested all passenger vessels by 1968, bankrupt in 1986.

TWA [4], founded via merger in 1930, almost went bankrupt in 1931, dissolved by act of Congress in 1934 but the brand was maintained by one of the daughter companies, purchased by Hughes in 1938, forced (by the government) to be sold in 1966, purchased by Icahn in 1985, bankrupt 1992, bankrupt 1995, final bankruptcy 2001.

There's a pretty massive survivorship bias when looking only at companies you've heard of, and even if they've survived in name for a century, it's not unusual for them to have periodic bankruptcies every 10-20 years that wipe out the shareholders.

[1] https://en.wikipedia.org/wiki/Erie_Railroad

[2] https://en.wikipedia.org/wiki/F._W._Woolworth_Company

[3] https://en.wikipedia.org/wiki/International_Mercantile_Marin....

[4] https://en.wikipedia.org/wiki/Trans_World_Airlines

Agreed, I was just trying to point out that it's not uncommon for very old companies to still be giants in the economy.

Even older companies I forgot to include: Citigroup, the NYSE.

Which is not at all my point.

My point is not that old juggernauts don't exist, it's that if big companies didn't fail often, they'd be far more commonplace and dominant than they are.

And your parent's point was that:

"These types of companies do not dislodge so easily such that they get "eaten for lunch" in the mere span of ten years."

But the parent didn't say they can't go down, just that they won't implode within a decade of today. If IBM, Microsoft, or Cisco are dying it's a multi decade process. The dot-com companies that imploded 15 years ago were mostly losing money from day one.

Perhaps it would be more accurate to say they are now longer relevant in the sense they are not at the cutting edge. IBM like you mentioned is a good example. They earn billions still, and will for the foreseeable future, but they're hardly technological pioneers.

Do they have to be? No glory in being a multi-billion successful business?

Fair enough. I'm perhaps overly cynical when I see this much optimism.

Optimism? It's simple extrapolation and a quick historical reference on how equivalently massive companies hold up over the near-term (5-10 years). I wasn't offering up an optimistic scenario.

In just three years they'll very likely hit $13 to $15 billion in annual profit or so (it'll be $8.5 to $9 billion in the next 4 quarters alone), and have $50+ billion in cash. What is inbound in the next three years that will hammer down upon a network carrying 1.7 billion users, that is still expanding and has no presently known threat to it, while possessing such extreme financial resources?

Absolutely nothing, that's what. No threat other than perhaps Snapchat could get enough scale in that time to be listed as a potential threat to them in the next three years.

Five years: $70 billion in cash, conservatively. $16 to $20 billion in annual profit, assuming a significant slowdown in their ad growth.

Then from the 5 to 10 year span, what's going to come flying in that is going to steal their $70 to $100 billion in cash? Or make their business disappear in just a few years. I can't name any other example of such a wild outcome happening, outside of maybe AOL, and they never had the financial muscle or scale that Facebook already commands.

It's simple extrapolation

That's the problem though. There's a good reason why just about every financial prospectus includes the phrase "Past performance is no guarantee of future results".

Then from the 5 to 10 year span, what's going to come flying in that is going to steal their $70 to $100 billion in cash?

Why are you so confident that you can predict everything that might happen in the next 5 to 10 years?

Why are you so confident that you can predict everything that might happen in the next 5 to 10 years?

The conservative, baseline prediction is generally "things tomorrow will be the same as today". Even if you stop their revenue growth (and there doesn't seem any good reason to think that is happening) then the parent's predictions are still basically true.

For the opposite to be true, FB doesn't just need to stop growing, it needs to shrink, and shrink very very quickly.

Can you think of a possible way Facebook could lose all their traffic in that 5 year timespan? All of FB, WhatsApp and Instagram disappearing all at once?

The conservative, baseline prediction is generally "things tomorrow will be the same as today"

Note that this line of thinking means that you'd never predict the rise of exceptional giants like Google & Facebook in the first place. If your line of thinking can't entertain the creation of these companies, it's unlikely to be any good at predicting their fall either.

Can you think of a possible way Facebook could lose all their traffic in that 5 year timespan?

My point is that since we can't imagine all the possible things that can or will happen in the next 5 years, the fact that we can't think of a possible way Facebook could lose all their traffic becomes meaningless and useless as a reliable source of predictions.

> what's going to come flying in that is going to steal their $70 to $100 billion in cash?

Snapchat's growing revenue streams and social competition for eyeballs. Geo filters are growing quite fast.

I mean that I took a cynical read e.g. skimmed that you were specifically talking about the near term.

There are many companies over a 100 years old who are still in the fortune 500, many of them have very strong market cap's.

Look at GE, or JP Morgan. http://fortune.com/2015/06/10/oldest-companies-fortune-500/

It's just the case that old companies aren't generally coming out of nowhere and all of a sudden turning everything around, part of the reason what apple has done over the past 10 or so years so impressive.

I didn't say there aren't any. I said that the markets aren't dominated by them, i.e. there is obviously such a thing as a large company declining, and it is obviously a common enough thing for there to not to be thousands of gigantic century-old companies among us.

It's plainly absurd to say "a company is big therefore it will grow." In my reading of the original comment I ignored the caveat of the 5-10 year timeframe. It's true that a gigantic company can almost definitely decline for 5-10 years without disappearing. It's not true that that means it will grow for those 5-10 years instead.

I think it's because a lot of those giants were commodities and could easily be replaced. Companies have learned the impact of branding, and they're now tied into our identities. So the social aspect keeps companies relevant and in power.

With regards to Facebook, when I'm looking over people's shoulders, what are they doing? Checking out their Facebook timeline, or Instagram, (or playing Pokemon Go for the time being). To unseat Facebook, Facebook would need to really betray the public's trust, and a competitor would have to provide an equally comprehensive service (and helpful migration tools). Google Plus's timing was poor and seemed to share everything with the pubic. ello had good timing, but they were invite-based and the minimal interface seemed like it lacked features.

Facebook is the AOL of the present, but unlike AOL they've managed to adapt (or acquire) to users' changing mediums for socializing.

I never said or implied such a thing, you're exaggerating.

What I said, is that it's the exception for a tech juggernaut to 'get eaten for lunch.' And that is indeed a fact.

Oracle, Microsoft, Intel, HP, Dell, Cisco, Google, Amazon, IBM, Texas Instruments, SAP, EMC, Qualcomm, Samsung, Apple

Where's the lunch eating? Where's the wasteland of destruction of tech titans? Most of those are now old companies, some are very old.

Now name a dozen plus companies of comparable sizes in terms of sales that have actually been destroyed in the last 30 years. It is thus that it's the exception, exactly as I said.

DEC, Silicon Graphics, Sun, Gateway just as I remember now.

Cray. Radio shack/Tandy. KSR. MasPar. Thinking Machines. Sinclair.

It's easy to accidentally have survivorship bias.

DEC and Sun are both in the list above (as HP and Oracle). This isn't just a technical point - I suppose it isn't out of the question for a mega-merger/buyout of something like Facebook and Microsoft could occur.

Nokia too. Or you will also claim it to be a part of Microsoft?

All the companies I listed do not exist now. Some were bought. They were bought because they failed, like Yahoo! Are you going to claim that Yahoo! still exists as part of Verizon?

They did not merge. They were bought for peanuts.

> All the companies I listed do not exist now.

Nokia has 114000 employees (almost twice of 2014 after buying Alcatel-Lucent: Nokia owns Bell Labs now) and $20b+ of revenue.

It's amusing how people in the HN bubble tend to think Nokia was bought by MS and closed.

They did not merge. They were bought for peanuts.

You are misremembering.

"Digital was acquired in June 1998 by Compaq, in what was at that time the largest merger in the history of the computer industry. At the time, Compaq was focused on the enterprise market and had recently purchased several other large vendors. Digital was a major player overseas where Compaq had less presence. However, Compaq had little idea what to do with its acquisitions, and soon found itself in financial difficulty of its own. The company subsequently merged with Hewlett-Packard (HP) in May 2002. As of 2007 some of Digital's product lines were still produced under the HP name."[1]

The Sun purchase wasn't as big, true. But they had multiple bidders, and sold for $5.6B:

"In late 2008, Sun was approached by IBM to discuss a possible merger.[4] At about the same time, Sun also began discussions with another company, widely rumored but unconfirmed to be Hewlett Packard, about a potential acquisition. By March 2009, talks had stalled between Sun and both IBM and the other potential suitor.

On April 20, 2009, Sun and Oracle Corporation announced that they had entered into a definitive agreement under which Oracle would acquire Sun for $9.50 a share in cash. Net of Sun's cash and debt, this amounted to a $5.6 billion offer from Oracle"[2]

These are both excellent of examples of companies that one might argue "failed" in the market place, but were still valuable years after their peak in the market. That is exactly what adventured is saying.

[1] https://en.wikipedia.org/wiki/Digital_Equipment_Corporation

[2] https://en.wikipedia.org/wiki/Sun_acquisition_by_Oracle

Not believing that "a company of FB's size will implode in 10 years" doesn't imply belief in "a company of FB's size will never implode."

For a while I adhered to the x company has so much cash it doesn't matter if another company out innovates them they can just buy their way into the market. But now I don't think it is true anymore. If it was true in the late 90's early 00's when Microsoft was cash rich and their major breakthrough had reached it's peak (similar position to Apple today) they would have been able to buy themselves into the next big thing: mobile. But Microsoft couldn't, in reality they got completely marginalized.

Facebook is roughly 10 years old... think about that. It's not very long in the grand scheme of things. A lot can happen in 10 years...

> Facebook will be doing $16 to $20 billion in profit within five or so years.

With no user attrition, I think that prediction is pretty reasonable as their revenue per customer is still quite low with plenty of room to run. But if the fickle consumer starts to migrate elsewhere, as they are wont to do, and FB cannot purchase or build those elsewheres, then those forecasts could be in trouble.

Until they run into their future competitor who won't sell to them, like snapchat.

Snapchat feels like the next generation's Twitter, and its engagement is still limited compared to Facebook.

this... and more to come yet unseen

One word: MySpace

MySpace suffered from having management who didn't know what they are doing especially after the sale to Murdoch. FB will do well because Zuck will still be running things.

Look how long Yahoo stuck around. These companies have massive inertia.

It stuck around for a long time, but it's stock price has been crushed.

Yahoo's stock price hasn't been crushed, unless you're comparing to 2000; in the last 10 years (because it's conveniently available), it's up 33% vs s&p500 up 66%. Not good, but hardly crushed like say Blucora (formerly Infospace), down 53% over the same time period.

But it is "crushed" if you consider that during the same time by putting your money into an index fund, you would have twice the return on your money with nowhere near the volatility. Getting half the return and twice the drama is kind of crappy.

Yes. And all the value in them came from external investments. There was only $5 billion in value left in core Yahoo.

Just wait until AI becomes smart enough to recognize and block ads. Then it is all over with these companies, because you can only push ads so far, and after that point people will start to object.

https://en.wikipedia.org/wiki/Nifty_Fifty

> Nifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks.

> The long bear market of the 1970s that lasted until 1982 caused valuations of the nifty fifty to fall to low levels along with the rest of the market, with most of these stocks under-performing the broader market averages.

> Because of the under-performance of most of the nifty fifty list, it is often cited as an example of unrealistic investor expectations for growth stocks.

What if ad blockers become mainstream? Sure, they won't stop all ads, but they could seriously dent ad revenue, as could changes in online behaviour.

Personally I'm surprised online ad revenue is so high, I rarely click on ads, the fact that enough people do to continue to make it worthwhile for advertisers doesn't really make sense to me. Clearly there are important details I'm missing out on.

Then they'll find a way to serve the content and the ad from the same domain.

Simply serve them from your own subdomain, the ad networks still do the heavy lifting, you just fiddle around with domain settings.

It's one possibility. Let's face it, ad networks have done nothing to fight back and adblock itself is really simple software based on rules that block domains and some class names in the DOM.

>Let's face it, ad networks have done nothing to fight... malware and scams

There are some ways around this (especially for social media sites).

Also, it's possible to block tracking cookies, making their customer profiles less information rich, which would also make the platforms less attractive to advertisers.

It doesn't take long at all for a majority of the users to switch to a different service... then what? But looking at these 3 companies, I would say that Google is different.

>small mobile screen is perfect for advertising.

? It's very inconvenient to have your limited content cut by 40%.

For us, yep! For advertisers, no, they love it.

> The small mobile screen is perfect for advertising.

Clearly this must be a typo. Advertisers pay more for larger ads. All this mobile ad revenue is based on app installs. And the clicks are often fat fingers on a phone.

Our Google ad salesman keeps pressuring us to spend on mobile. We try to exclude this segment, but we keep getting ads served to mobile devices and clicks. Your comment reminds me that I need to get this sorted out.

Yes. Thats why I have invested some of my money equal weighted in all three of them plus Apple. My thinking goes along the lines that I dont know the future, but I'm pretty sure at least a few of those companies will be a big part of it. They all have high aspirations and huge warchests. So if they dont make the future themselves, they can probably snap up any new promising technology.

There is a limit. However, all of this growth is partly due to previously unexploited advertising/marketing demand. Older mediums like newspapers/magazines, TV, and radio only served to a small niche of potential advertising buyers. Facebook, Google, etc. make it easy and cheap for anyone to advertise pretty much anything.

One can (and should!) argue that their great growth prospects are baked into their stock prices already.

Then why do the prices keep going up?

Hindsight bias. It's very easy to look at the 3 winners over a long time horizon and say, "Look, they keep on going up and up." If this were a real trading strategy, then Momentum would sustain itself over a longer time, but the empirical academic evidence is that it's short term.

Over long time horizons, this tends to reverse itself. (Both companies and markets with unusually high PE ratios underperform low PEs over long time horizons) This is well accepted in finance. [0] [1]

[0] https://www.fidelity.com/learning-center/trading-investing/t...

[1] https://faculty.fuqua.duke.edu/~charvey/Teaching/IntesaBci_2...

Interesting that you omitted Apple. You could view the stalling iPhone sales as analogous to Windows reaching market penetration...maybe Apple will come up with a revolutionary new blockbuster (maybe the car), but post-Steve Jobs that won't be easy.

I highly doubt none of these three will be disturbed in the near future.

For one, ad blocking is on the rise.

But publishers have done nothing to fight back. At some point, the probably will. It's easy to bypass ad blockers if they put any effort in doing so.

Also, we will see more and more native advertising. FB is a good example but your favorite tech quy on Twitter with million followers, your favorite basketball player on Facebook - ever wondered if they get money to tweet or share things? They do... Welcome to native advertising.

It'll be hard to block video ads that are stitched into your stream.

And once that happens people will be more inclined to move to a different service.

Google ads are really everywhere. Even on Hacker News!

Mobile app ads keep paying more and more. I'm regularly getting $1 per click, and sometimes as high as $5 (finance category). I can't remember ever getting this much for websites. I'm using google admob

As a web publisher, I earn on average $0.42 per click (mostly from http://www.daterangepicker.com).

As a web advertiser, I pay on average $1.76 per click (for SaaS stuff with a high CLTV).

$1-5 per click for app ads makes sense if the apps have a high CLTV, or the campaigns are temporary as they often are -- they just need to get enough installs to start ranking in app store categories, after which that becomes a free customer acquisition channel, or so I've heard.

Wow, that's a huge gap between spending and earning. Do ad networks have costs other than employees and hosting or did just nobody undercut that price yet?

Edit: What is CLTV? I tried looking it up but not sure what I found makes sense.

In addition to the direct costs of operating ad networks, it's likely/possible that the poster is targeting different people with his ads than are the advertisers whose ads run on his site.

CLTV: Customer Lifetime Value. Roughly, how much revenue can you expect to earn from a customer over the entire time they interact with your business.

May I ask what percentage of your visitors clicks on ads? $5 per click isn't really worth much if no one clicks the ad, or is that constant throughout topics?

Are you U.S. based? We're entering election season and the increased demand on advertising channels can have a network affect across all categories.

I was talking to a friend who is at an agency doing radio ads for a large retail company, and basically the company's usual budget will be blown out almost immediately on radio, so they're spending it on other channels.

I cant say I have ever intentionally clicked on a mobile ad. That little 'x' is too tiny for my chubby fingers.

Twitter's ads are like this. I hit the x, it opens the ad. I back out and hit the x again, it closes the ad. This behavior is consistent enough that I'm almost convinced it's intentional.

What? That's seems absurdly high..

It's not.

"Insurance", "loans", "mortgage" are all $44+ per click.

Some very specialized one like "mesothelioma suit" are $800+. Even misspellings like "mesotheliama" are $600+.

https://www.adgooroo.com/resources/blog/the-most-expensive-k...

https://searchenginewatch.com/2016/05/31/the-most-expensive-...

mesothelioma cases must be quite lucrative for them to spend this kind of money.

This is the one of the saddest data table I've seen in awhile.

I try to remember searching on that term and clicking the ads from time to time, for no other reason than to line Google's pockets. It seems like the quickest way for me to pay them back for the various free (and ad free) services that I use from them.

Probably there is something terribly wrong with this, but I'm not entirely convinced. I am a human typing a search, and physically clicking a link in the results. I just don't have or happen to know anyone who has mesothelioma.

It's pretty steep compared to the last decade. For a while during the dotcom bubble GoTo.com used to list how much a text ad click cost when it was clicked. I remember Dell running ads on there that were paying $5+ per click at the time, and that wasn't uncommon. I really haven't seen anything quite that crazy since those days, when it comes to general / broad-based CPC advertising.

If (CPC * ConvRate * CLV) > CPC then you can pay those prices. Granted, it's not entirely that simple with payback periods to consider, but big advertisers like insurance companies have plenty of money to fund acquisition until it pays back.

I wonder if the fact that Google bans ad-blocking from its store and pre-loads Chrome on Android, which doesn't allow ad-blocking extensions either, has anything to do with that.

Somehow, between its 5 other anti-trust charges against Google, the EU seems to have missed one of Google's biggest abuses of its monopoly-level position in the mobile market.

Bears asking what market your website is in, perhaps? Since some keywords are more competitive than others, and if they're related to your site topic, presumably there's strong targeting there.

Its mobile apps, not websites. Banners and interstitials in finance mobile apps.

Sometimes I click ads just to give money to Google.

Sometimes I click ads just to make advertisers pay.

Sometimes you both help pay my salary.

I copy the URL of the web page in ads and then go directly to that website instead of clicking the ad.

Does internet advertising work, or is it possible that companies are buying more in desperation? If the latter, it will peak just before it crashes.

Majority of people pay for ads if they earn more doing so. The cost of ads tells us it works for a lot of people and companies.

Maybe big brands pay over, or pay for just to be everywhere, but I wouldn't call it desperation.

Yes, Internet advertising works surprisingly well.

Its so bizarre to me. You'd think there would be a finite appetite for advertising, but apparently not.

There can be both a finite appetite for advertising and increasing Google revenue as long as Google is either making advertising more effective (expanding the market), taking revenue from other publishers (controlling the market), or making money outside of advertising.

Some random stats I found estimate that advertising is currently a $500B yearly industry, which means Google is only 15% of the industry.

Right, I found estimates of $600B yearly ad spend. To put that into context, total annual spending (aka world GDP) is over $70T, meaning that less that 1% of all spending in the world is on advertising.

And you can probably slap another one or two dozen trillion dollars onto that surface GDP figure. The underground / black market economy is very, very substantial.

In addition, the online advertising market is growing naturally as more people get connected to the internet and already-connected people get wealthier. This is why Facebook is so keen to dominate the Indian market that they are willing to offer free (but not net neutral) internet access.

You forgot the most important part: making ads more targeted. More more targeted an ad is, the more you can charge for it. So Google can sell the same number of ads to the same number of advertisers and yet make more money, while advertisers get more bang for their buck.

Only 15%, but then they don't do TV, radio, magazine, newspaper or billboard ads.

There is. Advertising as a share of GDP has been flat for like 75 years. But what we see here is a platform shift away from TV and print and to the interwebs. There are a lot of convergent trends happening to drive this. Older TV watchers dying off, explosion of pocket computers, fragmentation of TV ad market by rise of cable channels, etc.

Still a lot of print magazines to kill and ad dollars to move from TV to online.

Yeah but TV ads have the nice advantage that you can't easily block them - unless you're timeshifting, that is. And muting, well, it blocks the audio, but you still see the video that can get a message across.

Also, print ads, given a sufficient niche-ness of the magazine, are way better targeted to actual customers than web ads.

Is TV not a shrinking market? I thought subscriptions to cable and satellite were down.

For a small part of the population, yes, but it's still mass media.

Comcast was really pleased that subscriber numbers only decreased by 4,000 this quarter IIRC Normally they see 40,000

That's what I thought. So the OPs premise stands that some of this is coming from revenue leaving traditional ads.

Bloomberg actually did a decent writeup on this.[1]

[1] http://www.bloomberg.com/news/articles/2014-03-03/advertisin...

About $500 billion globally, with ~$100 billion online, last I'd checked. Based on a global world product (GWP) of $75 trillion. Or 1.5% of the global total.

If that were to be split 3 ways between Google, Facebook, and Everyone Else, Google might get $167 billion in revenue, or (at 20x PE) $3.3 trillion market cap.

More and more people are still coming online in third world countries.

That appetite is proportional to the careless feeding of stats and the affinity to fall for the ads.

I think we'd see a surge in ad purchasing right before the death of it. Why does no one see this uptick in ad spending a potential indicator that advertisers are getting less of their money's worth?

Possibly because that's not how advertising budgets are really set? Nobody says "lets throw more cash at the thing that isn't working anymore". Certainly people will accept slimmer margins if they're still making money but every ad campaign has KPIs that are optimized for and no VP of Marketing is going to keep their job by accepting a status-quo of less effective, more costly advertising.

Except that's the fundamental issue of advertising? Attribution has always been wickedly difficult. It was supposed to be easy with Google/FB (click -> sale, duh), but now people are clicking on fewer and fewer ads, so Google/Facebook et al. are repositioning as "oh no, they saw our ads for x seconds, we definitely swayed them."

The issue is that views definitely have an impact. However, especially on mobile, this impact is very difficult to measure. So most of the DR industry uses last click, even though they know its incorrect, because there is nothing better.

The impact is difficult to measure everywhere all the time. How do you think they measure impact of billboards? Radio ads? TV ads? All by the same hand-wavy "there is nothing better" types of metrics.

I didn't say they don't have an impact, I said it's obscenely difficult to gauge attribution and online ads weren't the panacea they were supposed to be because it turns out people don't click ads. Despite this, advertisers are still advertising. An increase in ad spending is not any indicator that ads are working well because no one has ever known how well they worked.

Definitely. This is a part of my professional life, so I get exposed to these issues all the time. TV, in particular, tends to be measured in very strange ways by DR advertisers because they appear to believe that advertising was invented along with the click, by Google (really Overture, but hey).

To be fair to offline, you can get a pretty good read on store sales as a function of advertising if you do geographical splits. Its modelled, and statistical, but there's definitely nothing wrong with that.

I think the online problem is harder because its so easy to measure clicks that people focus entirely on them without considering other approaches, whereas with offline its hard to get any measure, so people are willing to try different things.

PokemonGo just got a callout in the earnings call.

I don't understand your comment. It got a "callout in the earnings call", what does that mean? Does the "earnings call" refer to a part of the article I can't read (paywall) or are you making an assumption about this being because of PokemonGo and Google/Alphabet internally mentioning PokemonGo in a conference call?

Alphabet 2016 Q2 Earnings Call: https://www.youtube.com/watch?v=EVpWjo023cE

Another comment linked the Wikipedia, I understand now. Thanks for responding!

https://en.wikipedia.org/wiki/Earnings_call

Ah I should just have googled it. Thanks!

Literally the phone call (conference) the CFO + auditors will do with analysts to share earnings data and background info.

Ah. Yes. "Thank you" for enriching so much my life.

http://imgur.com/MpO82Ta

I don't think those are actually Google ads. I went to techcrunch and clicked on the AdChoices icon and they all popped up non-google info.

Yup. Looks like I got linked to adinfo.aol.com on both mobile and desktop. The AdChoices icon is common across many platforms (it's from the Digital Advertising Alliance), their list of members is pretty huge[0].

[0] http://www.aboutads.info/participating

Serious question: How does Google's ad revenue increase when Google themselves were saying people aren't clicking on adwords as much when searching in mobile? Also when people are using voice search such as Siri or Google Now, they are not even seeing the ad results.

AdWords has been making several big pushes over the last few years that contribute to this.

Among them:

- Pushing advertisers to advertise higher up in the funnel with additional clicks. Things like the push for "ZMOT" (Zero Moment of Truth) and such focus on the branding side of things before people are ready to convert. Google has long had advertisers focus primarily on last click conversions which does not play nicely with tracking for brand efforts.

- Video ad pushes by reps have been pretty big. Video CPMs are much higher than static display images, and that is also why you see every publisher under the sun having a a video for every article that autoplays even if it is a useless annoying video. And why they are looking into auto-generated videos.

- Turning previously free resources into paid plays (Google Product Search)

My gut right now in terms of their future monetization is the continued transition of Gmail from a "regular" mail platform into an algorithmic feed where advertisers have to pay a dynamic, auction-based payment model to get into the inbox. The Promotions tab is the first step in that direction. Gmail ads have been the next step. I would expect them to start adding them spread out through your inbox feed in the not too distant future, and then start drastically tapering brand reach unless you pay up like FB has done.

Additionally, their push for bots and voice search is to have people ask questions and just provide the answer and not give a list of choices. They want to know you well enough where they can guess right, but the options they provide are all paid placements, so you get the most relevant paid placement. It won't happen now, but once voice assistants are an integral part of the mobile experience that people can't live without and Google succeeds in owning the space.

> How does Google's ad revenue increase when Google themselves were saying people aren't clicking on adwords as much when searching in mobile?

Google sells ads besides search ads, so a lower per-search rate of clicks on search ads on mobile doesn't mean lower number of total clicks. (They sell both in-app mobile ads, and web ads that are not search ads.)

Also, a lower per-search click rate doesn't mean lower per-search revenue if the value advertisers are willing to pay per click goes up more than the decline in per-search clicks.

They definitely seem to have a way to get you to accidentally click on their mobile display ads while your scrolling through the page. I always get stuck with that and have to go back.

It is time for them to go for the big kill and aquire Twitter. Twitter can benefit from Google's Machine Learning competency and Google can benefit from Twitter's social network competency. They should do this before Mark Zuckerberg's offer they cant refuse.

How? Twitter's data is already publicly available.

As a Google shareholder this is great news, but now I'm starting to feel that the market is underestimating the chance that someone simply builds a better search engine.

For example, here are 3 search queries I recently performed where I found Google's results lacking:

1. What is the best Thai restaurant within 10 kilometres?

2. What companies have a market cap greater than Microsoft?

3. Does Android track my location by default?

In each case I don't want to see a list of web pages - I want a single one-sentence answer (like I would get for "what is the height of the Eiffel Tower?"). Something like Wolfram Alpha on steroids.

No doubt Google is working on this problem, but what is the chance someone else beats them to it? And how much damage would it cause Google if they do?

Heyo, I tried the "Best Thai Restaurant near me" and got a result with a list, pins on a map, etc. So, it could be a query thing. (screenshot) https://www.dropbox.com/s/lr01wno3aqskoan/Screen%20Shot%2020...

This worked across desktop and mobile. You're right, that it doesn't handle specifically within 10km, but I thought I would mention it if it was an acute need!

Also consider ads. If you look at the progression of Google search page, it's not uncommon for a laptop/mobile screen to be entirely ads. Basically they have trained us to search for ads. It's possible one day they'll take this too far and there will be a better alternative. While I dont think it is likely , if these things aligned Google could realistically lose a big proportion of their business in a few years. It would be brutal.

My understanding is that this is precisely what services such as Google Now (or Apple Siri, or Amazon Echo, or Facebook's Faceless Voice) are addressing. True conversational interfaces, ask question, get answer.

(Also true integrated global persistant vocal surveillance, but that's another matter.)

After hours is through the roof. It's currently at $808 as of this time. I wouldn't be surprised if Google is the world's most valuable company tomorrow.

Apple still beats them, I think. At $808 Google's market cap would be around $550 billion, while Apple's is currently around $600 billion.

paywall;dr

Could major election year be a significant contributor?

Cofounder/owner of large political ad exchange here. Yes, the election is a major contributor. But not in the quarter Google is reporting on now.

use the "web" link under the article link. Does a search for the title. Getting to WSJ from Google's search page bypasses the paywall.

In chrome, just prepend a question mark before the URL, which will send you to google with the article as the first hit. Click it and you can read the whole article.

Facebook, Google, Amazon all surge! Why?

They made more money than the markets expected.

Wish I could get a job at Google :(

Why can't you?

Too anxious to interview.

This is all good news for our industry. Soft numbers among the top players trickle down in the form of reduced demand and investor interest for earlier stage companies. Good numbers send a signal that the industry is healthy.

Edit: wow stepped on a mysterious hater button. :P

Or it could be a sign that the industry is consolidating and that there's no point in investing in non-FANGAM companies.

> FANGAM

Does Netflix fit in that top-6?

It's probably on there due to it's disruptive nature.

> our industry

Who does 'our' refer to here?

Clicking your profile, it's not clear whom you work for, so I sure hope it doesn't refer to hackers of hacker news in general.

He refers to tech startups.

I don't like to think advertising is necessary for every tech startup. I certainly don't want to be associated with the industry that rubs annoying stuff in your face as much as they can get away with.

The comment you replied to wasn't talking of the advertising industry in particular, but of the tech industry in general. The "big players" in his comment were the big companies, and "us" were the startups.

In other words, Google profits surge because it is using TensorFlow to accurately predict how to price ads to maximize revenue.

That's not how it works at all. It's a market: there is a limited supply of impressions/clicks, and it is _buyers_ who decide the price. Buyers are rational -- I like to take that charitable view at least -- and are bidding less than the value to their businesses of those clicks. CPCs are actually down on average. If that's true, then it must be simply inventory growth: mobile is providing ever more interaction points with consumers.

Market prices are determined by the intersection of supply and demand, so it is not just the buyers who choose. Google has some say over the supply. They may increase or decrease the supply based on behavior they sense more broadly in search.

It's amazing to see on HN that some of the times I am most right, I am also most downvoted. Life lessons...

Well Google is the intermediary. They can (and undoubtedly do) directly affect supply, demand, and price. They can purchase ad space from a publisher for $0.45, mark it up x, and sell it. They can slow demand by temporarily (even for seconds at a time) by increasing cpc. They can lower supply by lower bids. They could in theory even pre-sell ads when supply is in excess.

Google has routinely increased profits by a huge amount through better machine learning. It's been using statistical optimisation for years. Such a massive jump almost makes me think it must be something like that, because the timing would be about right for a major rollout of a new ads optimisation engine based on their latest AI research, and 25% increase doesn't seem possible to occur naturally just through shifts in supply/demand. Only radically better ad targeting could do that.

Any source for this assertion?

Reply on news.ycombinator.com