Google Sees Higher Display Ad Spend From CPG Clients

Higher spending by clients in some categories helped buoy Google’s display ad business during the first three months of 2010, executives said today.

Large entertainment and packaged goods companies were among those to boost their spending on Google’s ad network, CFO Patrick Pichette said during the company’s quarterly earnings call. “Large advertisers have come back,” he said.

The return of big budgets goes back to at least Q4, when CEO Eric Schmidt called display advertising “the next huge business for us.”

Google’s Q1 revenue grew 23 percent compared with the 2009 period, driven in part by a 15 percent year-over-year increase in “aggregate paid clicks” – a term that refers to the total number of ad clicks on both Google-owned properties and partner sites. Additionally, the company enjoyed an average cost-per-click (CPC) that was 7 percent higher globally than in Q1 2009. Performance was strong across all major product areas, including search, display, and enterprise.

Google has been true to its promise – voiced a year ago – that it would ramp up hiring and M&A activity. The acquisition spree that kicked off last fall with the purchase of Teracent continued this year with the buys of video platform Episodic and British startup Plink, among other firms. (Google’s proposed acquisition of AdMob remains in regulatory limbo.) The company is now queuing up additional M&A activity, Pichette said.

Google said it added 786 employees during the quarter, bringing its headcount to nearly 21,000. Pichette said the company remains focused on hiring talented people in ad sales and engineering.

During the call, VP of product management Susan Wojcicki ticked off a few of Google’s Q1 ad product roll-outs. Among them were search funnels, above-the-fold targeting in its ad network, remarketing, and mobile-specific ad formats and targeting.

She said one near-term product priority is the development of ad models where marketers pay only for conversions, an area Google entered last year with the debut of product ads.

“We definitely see potential in cost-per-acquisition,” Wojcicki said. Typically in such arrangements, she noted, “a retailer gives us all information about products. Google does the targeting to decide where to show those ads, and we take a percentage when the user converts. That’s something we’re investing in.”