Big gains from mobile advertising and tighter spending control has led to a nine percent gain in shares in the third quarter 2015 for Alphabet, the parent company of Google.
This news is coming on the heels of a recent reorganization, which legally and financially separated Google search, ads, YouTube and the Android operating system from more long-term and highly speculative investments like Nest, the learning thermostat.
Alphabet surprising investors. Alphabet surprised investors with a $5.1 billion stock buyback, the first move of its kind from this company. Stockholders were getting frustrated at Google’s seemingly unwillingness to return something to shareholders despite its over $70 billion stockpile, so the timing could not have been better.
Since July, shares of Alphabet have seen a 25 percent increase in value. An additional push of 9.1 percent in after hours trading raised the company’s market capitalization value to close to $500 billion. Net income totaled $3.98 billion, compared to $2.74 billion a year ago — although they didn’t beat their own forecast, that sort of runaway growth is remarkable.
Alphabet beats predictions. Wall Street had predicted a net revenue of $15.04 billion, which Alphabet beat with $15.11 billion reported. That revenue gain represented a 21 percent year over year increase and beat their second quarter’s growth of 18 percent year over year.
Although internal reorganization made a significant difference to revenues and operating profit margins this year, a renewed interest in online advertising helped, too. According to The Interactive Advertising Bureau, U.S. online ad revenue rose 19 percent in the first half of the year and Alphabet itself reports that the number of paid clicks on its own websites increased by 35 percent.
New Chief Financial Officer Ruth Porat says that the “key highlight” of the third quarter was strong mobile search revenue due to new ad formats designed specifically for mobile. That’s a nut that marketers have long been looking to crack. By increasing the size and relevance of mobile advertisements, Google may have solved the puzzle behind truly successful mobile marketing. This sector has long eluded marketing professionals, who have been looking for a way to reach the two billion mobile users predicted worldwide by 2016.