Google Sees Q2 Revenue Jump, Unveils Display Deal with OMG

Google’s revenues jumped 24 percent last quarter as the company claimed progress in its quest to grow display ad sales into, in the words of CEO Eric Schmidt, the company’s “next billion dollar business.”

As evidence of that progress, the company announced a display advertising agreement with Omnicom Media Group. While details of the relationship are murky, it involves Google helping OMG develop a “trading desk” to boost its audience-driven ad buying capabilities – in particular on Google’s DoubleClick Ad Exchange.

“We’re working closely with our agency partners to help them move to an audience buying model,” said Jonathan Rosenberg, SVP product management, on an earnings call today.

Google’s revenues for the second quarter of 2010 were $6.82 billion, representing a 24 percent lift over Q2 2009. The company’s owned sites brought in $4.5 billion in revenue – or 66 percent of the total – while AdSense partners generated $2.1 billion, or 30 percent. Net income for the quarter was $1.84 billion, compared to $1.48 billion in Q2 2009.

During the quarter Google saw a slight sequential decline in aggregate paid clicks, a metric that combines ad clicks on Google’s sites and AdSense partner sites. However year-over-year paid clicks, a more significant measure, increased by approximately 15 percent. Meanwhile, the company’s ad prices continued to rise, both year-over-year and sequentially. The average cost-per-click on Google-owned and partner sites grew by roughly 4 percent compared with the second quarter of 2009 and by 2 percent over Q1 2010.

The balance of revenue coming from outside the U.S. was basically unchanged from the first quarter, totaling $3.53 billion or 52 percent of total revenues. The U.K. showed some weakness; revenues of $770 million there accounted for 11 percent of global revenues for the quarter, down from the 13 percent the country commanded in Q2 2009.

On the earnings call today, execs heralded uptake of the company’s mobile products and ad formats. Rosenberg noted devices built on its Android operating system are now being activated at the rate of 160,000 a day, compared with 65,000 in Q1. He said uptake of the company’s AdMob mobile ad network is proceeding apace, and pointed to data suggesting click-to-call mobile ads perform significantly better than both online search ads and mobile ads without a phone number.

As an example of heightened advertiser interest in both its display and mobile ad products, Rosenberg cited Procter & Gamble, noting the CPG giant has become one of the company’s biggest-spending customers across all its channels.

Not incidentally, P&G is a client of Omnicom-owned agency network OMG, which has entered a relationship with Google to support its audience-driven ad buying activities. Under the deal, Google said it will help develop a “trading desk” for OMG that will allow it to more easily search for and buy ad inventory from Google’s DoubleClick Ad Exchange and other inventory sources.

Google Global Sales Chief Nikesh Arora noted Google has similar relationships with other agency networks and holding companies, including Publicis and GroupM.

“There’s hundreds of millions of dollars at stake with this kind of deal,” Arora said. “If you get it right, every member of the ecosystem can get their share of the profit.”

In a side note during the company’s earnings call, CFO Patrick Pichette revealed Google spent heavily defending YouTube from a high profile copyright infringement suit by Viacom. He said the company sank $100 million into that legal battle, calling the victory “good for the Internet.”

Finally, the company continued to add employees during the quarter. As of June 30, Google employed 21,805 full-time staffers globally, compared to a headcount of 20,621 three months earlier.

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