Google: YouTube, Android Drive $3.5B in Ads

Google officials claimed the search engine was banking $2.5 billion in display advertising from YouTube, as well as $1 billion in mobile ads, thanks largely to Android.

Google's senior management surprised financial analysts on the company's third-quarter earnings call by disclosing some hard numbers regarding Google's display and mobile advertising businesses.
Google Oct. 14 revealed a 32 percent Q3 profit hike, based on $2.17 billion on earnings per share of $6.72. Revenues totaled $7.29 billion, up 23 percent from the same period a year ago.
While those numbers were solid and surpassed most analyst expectations, a few other figures forced analysts to cast off the one-trick pony mantle that has become associated with the search engine.
Jonathan Rosenberg, senior vice president of product management for Google, revealed that the company's display ad business is on a yearly run-rate of $2.5 billion.
That includes all ads running on Google's video sharing Website YouTube, as well as non-text ads on the Google display network and DoubleClick platform.
It's clear that the bulk of these dollars comes from YouTube, which Rosenberg said is monetizing over 2 billion page views per week, up 50 percent year-over-year.
However, Google CFO Patrick Pichette declined to say whether YouTube-which costs a lot of money in infrastructure to power-was profitable.
Even so, Rosenberg proclaimed display ads the next multi-billion-dollar business after search for Google, and it's "already here."
Google's mobile ad business is operating at an annualized run-rate of $1 billion, which means the company's Android operating system is finally bearing fruit for the company. Mobile ads run on Android-based and Apple iPhone smartphones.
"Clearly, this is the future of search in the Internet," Rosenberg said. "More people in more countries are coming online from these smartphones."
Mobile search queries have grown five times in the last two years, casting aside Apple CEO Steve Jobs' proclamation that people don't search on mobile phones, but within applications.
Google CEO Eric Schmidt, who joined the call for the first time in months, chimed in that "Android is the largest single platform play available in the market today."
Pichette clarified that revenues generated from Google's AdMob mobile display ad unit are reflected in both the company's display and ad financial totals.
While Google was plenty bullish about mobile and display advertising as conduits for new revenue, Rosenberg stressed that search is still at Google's core.
He noted that the new Google Instant predictive search technology was not created to help Google make more money, but because "it's better for the user."
He added that its financial impact has been minimal and that the software-which renders search results in real-time-costs a lot of money to run.

"It saves about two to five seconds per search, and users absolutely love it," he said. "The percentage of people who select Instant results before they finish typing is actually rising."
Financial analysts appreciated Google's display and mobile ad details.

Caris and Company analyst Sandeep Aggarwal said in a research note Oct. 15 that search will deliver a compound annual growth rate of 15 to 16 percent, with non-core businesses such as display and mobile yielding 40 to 45 percent CAGR.